Question: a. Beta Standard deviation Stock A 1.31 4.68% Stock B 1.01 17.72% The beta and the standard deviation of stock A and B are provided

	Beta	Standard deviation
Stock A	1.31	4.68%
Stock B	1.01	17.72%

The beta and the standard deviation of stock A and B are provided in the table above. Which of the stocks will have a higher risk premium and a greater expected return? Explain. [2 marks]

b. When a firm announces a dividend cut, it provides signals to the investors. Briefly explain one possible positive signal and one possible negative signal associated with dividend cuts. [2 marks]

c. Efficient market hypothesis (EMH) states that the market prices of a security accurately reflect all available inforrnation. Explain:

i. what all available information is in the context of three different forms of EMH [3 marks], and ii, the implication of market prices to reflect all available information. [1 mark]

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