(i) Describe briefly the Efficient Markets Hypothesis. [3] (ii) Explain the implications of the Efficient Markets Hypothesis for investment trading strategies. [3] (iii) Explain why investors will still wish to have as much information as possible concerning a company and its securities before investing in it even if the Efficient Markets Hypothesis applies? [2] [Total 8] (i) A portfolio consists of only two securities, SA and SB, with variances of return V and V and covariance of returns CAB Show that the minimum variance occurs when the proportion held in S is: (ii) XA = VB-CAB VA-2C AB +VB [3] Consider a two-security world in which the expected return produced by each asset is equal to the standard deviation of its returns. Assume that for Assets A and B, whose returns are perfectly correlated, both quantities are equal to 6% and 10% respectively. Derive the coordinates of the minimum variance point. (a) (b) Draw a diagram to illustrate the shape of the efficient frontier. [4] [Total 7]