1. The risk and return of several securities are given as follows: a. Graph the Security Market Line and indicate which securities are overpriced and which securities are overpriced. (15) b. Modern portfolio theory assumes market efficiency. What is market efficiency and how do efficient markets affect fundamental and technical analyses? (10). 2. Briefly explain the efficient market hypothesis. Under what set of conditions would you expect a securities market to be efficient? Identify the main obstacles to market efficiency. (10) 3. Ratio analysis is accepted as a very useful technique in evaluating performance of business units. What limitations need to be considered before it is applied mechanically? (15) 4. Those funds which have been used to acquire current assets are generally referred to as the working capital of the business. The net working capital is represented by current assets minus current liabilities. YOU ARE REQUIRED TO ANSWER THE FOLLOWING QUESTIONS WITH REGARD TO WORKING CAPITAL. a. What variables determine the amount of working capital needed in an organization? (5) b. What factors will reduce the length of the working capital cycle? (5) c. What are possible causes of an increase is inventory levels? (5) d. What possible steps can a company take to improve its cash flow? (5) e. How would you manage working capital