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ABC Bhd is an all equity firm specializing in pharmaceutical industry. The current earnings per share is recorded at RM5.5 The companys stock returns have

ABC Bhd is an all equity firm specializing in pharmaceutical industry. The current earnings per share is recorded at RM5.5

The companys stock returns have a correlation of 0.35 with the market portfolio returns, and have a standard deviation of 30%.

i)Currently, the stock market is uninformed of the Poll Bhd new investment opportunity.

ii)Explain how your analysis in part (i) can be explained by the Efficient Market Hypothesis.

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