Question 1 (15 marks) Are the following statements true or false? Briefly explain your answers. (a) If a firm announces an unexpectedly large cash dividend, the EMH would predict a gradual price change to occur for several weeks after the announcement. (5 marks) (b) If the ROE of a company is higher than its discount rate r, it would be in shareholders' interest to retain earnings in the company. (5 marks) (b) If the expected return on stocks is higher than the return on the risk-free asset, a risk-averse mean-variance investor will choose to hold some stocks even if stocks' returns have a very high (but finite) variance. (Hint: Optimal weight?]