Question 3 Imagine that the money managers who invest Syracuse University's endowment have come to you for advice. They tell you about a company, Smith Kline Beecham, which has two classes of stock: E and H. These two classes of stock are identical in terms of their voting rights and their claims on the prots (and potentially liquidation value) of the rm. All payouts (i.e., dividends) are equalized across the types of stock, so that one class E share must provide the same dividend ow as one class H share. a) 1What does the Eicient Market Hypothesis predict about the relative prices of class H and E shares? b) It turns out that the class H shares have traded at a price higher than the class E shares since the two classes were established. The money managers want to know how to exploit this deviation. Describe an investment strategy that will enable them to arbitrage the price deviation. c) Is this arbitrage strategy risky or riskless? Under what circumstance, if any1 would one lose money? (Hint: Do prices have to move in a way that will pay off?)