(15 marks) Question 8 Your friend Jay knows you are currently taking a course in Finance. He has asked you to advise him on his investments. Jay received a bonus of $5000, and wants to invest $1000 in the stock market. He has done some basic research, and wants to invest in his two favourite companies, Awesun and BossTech, that he says have been doing well. He explains that he found that the annual returns in the past have been 10% and 15%, respectively, and therefore wants to invest 40% in Awesun and 60% in BossTech Using historic returns as an estimation of expected returns, what is the expected return a. of Jay's portfolio if he invests as intended? How much money does he expect to have in (6 marks) one year? b. Based on what you have learned in the course, what would you say to Jay in relation to his asset choice? In your answer, include the following: historic vs. expected returns; risk and return; diversification; relevant risks; and CAPM. (9 marks) (15 marks) Question 8 Your friend Jay knows you are currently taking a course in Finance. He has asked you to advise him on his investments. Jay received a bonus of $5000, and wants to invest $1000 in the stock market. He has done some basic research, and wants to invest in his two favourite companies, Awesun and BossTech, that he says have been doing well. He explains that he found that the annual returns in the past have been 10% and 15%, respectively, and therefore wants to invest 40% in Awesun and 60% in BossTech Using historic returns as an estimation of expected returns, what is the expected return a. of Jay's portfolio if he invests as intended? How much money does he expect to have in (6 marks) one year? b. Based on what you have learned in the course, what would you say to Jay in relation to his asset choice? In your answer, include the following: historic vs. expected returns; risk and return; diversification; relevant risks; and CAPM. (9 marks)