Joey Ha is working for Best Portfolio Inc. and is studying the latest financial statements of CBA Inc. which were released yesterday. After some rigorous analysis, she believes that she has found some anomalies in the company's receivables and inventory leading to an overstatement of the company's actual financial health. (a) (5 marks) A characteristic of an efficient market is that investments in that market have zero net present values (NPV). What is the implication of this characteristic for investors who buy and sell stocks in an attempt to beat the market? Explain. (8 marks) (6) If the market is weak form efficient, are there any profit making opportunities from studying the financial statements of CBA Inc.? Explain. (c) Joey's supervisor is interested in three stocks and has estimated (12 marks) the other information as shown. Calculate the expected return and standard deviation of an equally weighted portfolio of these three stocks. Show your steps. Rate of return State of economy Probability Stock A Stock B Stock C Boom 0.2 0.17 0.22 0.27 Normal 0.7 0.09 0.12 0.18 Recession 0.1 0.04 -0.06 -0.16