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An AR(2) process: Yₜ = 1.2Yₜ₋₁ − 0.32Yₜ₋₂ + εₜ, εₜ ~ WN(0,1). Which is CORRECT?

A Stationary because sum of AR coefficients (1.2 − 0.32 = 0.88) is less than 1

B Non-stationary because characteristic equation roots are inside the unit circle

C Stationary because both characteristic equation roots lie outside the unit circle: z₁ = 2.5, z₂ = 1.25

D Non-stationary; mean undefined and variance grows without bound

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