Jake Ltd made an announcement at the beginning of the week concerning the discovery of a new oil well that is expected to double its production well into the next decade. The announcement was completely unexpected, and shares of Jake Ltd had been trading at a frantic pace since the announcement. At the beginning of the week the share price was 25 cents, by mid-week 37 cents and by the end of the week 50 cents. Is the market for Jake Ltd efficient or inefficient? What form of market efficiency is violated? Explain. [2 marks]

b) Define systematic risk and unsystematic risk. Which type of the two can be eliminated, and how? Explain. [3 marks]

c) What happens to the stock price on the ex-dividend date, and why? Are dividends taxed in Australia the same way as in the US? [3 marks]