Suppose that price per share of New Orange is currently $40, and normal risk adjusted monthly rate of return for New Orange equity is 3%.

1. Suppose that the current price is efficient. Compute the expected price per share in one month

2. Now suppose that you read in the Wall Street Journal that NewOrange is a target of a pending takeover by its larger competitor. The takeover is expected to take place in one month and the expected premium paid by the acquirer is $10. Compute the expected monthly rate of return on NewOrange if the market price remains $40

3. Suppose that market is efficient. Find new share price of NewOrange

4. How fast must the share price adjust in order to remain efficient? Briefly describe mechanism of the adjustment