3. (a) The Efficient Market Hypothesis (EMH) states that "When mispricings occur in markets, they should be immediately eliminated by arbitrageurs, who exploit these opportunities for a profit." In practice, there are limits to the effectiveness of arbitrage in eliminating certain security mispricing. Explains why it is difficult for rational traders to un-do mispricing caused by less rational traders. (40 marks) (b) Explain how the following factors influence the distribution of wealth between bidders ano the targets during mergers \& acquisitions. i. The method of payment: cash versus stock. (20 marks) ii. The origin of the bidder: domestic versus cross-border. (20 marks) iii. The bidder's attitude: hostile or friendly. (20 marks) 3. (a) The Efficient Market Hypothesis (EMH) states that "When mispricings occur in markets, they should be immediately eliminated by arbitrageurs, who exploit these opportunities for a profit." In practice, there are limits to the effectiveness of arbitrage in eliminating certain security mispricing. Explains why it is difficult for rational traders to un-do mispricing caused by less rational traders. (40 marks) (b) Explain how the following factors influence the distribution of wealth between bidders ano the targets during mergers \& acquisitions. i. The method of payment: cash versus stock. (20 marks) ii. The origin of the bidder: domestic versus cross-border. (20 marks) iii. The bidder's attitude: hostile or friendly. (20 marks)