Subject is Investment Managemnt

QUESTION TWO [20] "In an efficient market, on average, competition would cause the full effects of new information on intrinsic values to be reflected instantaneously in actual price". With reference to this statement, explain the central idea of EMH, forms of market efficiency and tools investors may use to try to outperform the market. QUESTION THREE [20] 3.1 Recently, Mkhize & Smith Company paid an annual dividend of R5.50 per share. The dividend per share is expected to grow at 10% per year for the next two years and then grow by 5% thereafter. Shares in other companies with a similar level of systematic risk to Mkhize & Smith yield 15% return on equity. What is the market value of Mkhize & Smith Company. (8) State of economy Probability of state Return for share ZA 1: Recession 0.3 -10% 2: Normal 0.4 10% 3: Boom 0.3 30% 3.2 Using information in table 3.1 calculate the expected return, variance and standard deviation of share Z. (12)