1. Briefly explain How an investor can gain further benefits on diversification by inclusion of foreign investment securities into his/her portfolio. (2 Points)
2. One of your friend plan to extend his current investment portfolio by investingin a share traded in Thailand stock market. The historical data indicate this investment offer a 14% annual average return with 17% standard deviation.Currently, your friend is holding an investment portfolio which worth AUD22.80 million. For the investment in Thailand, she/he expects to use AUD7.20 million which collected by selling one of her/his real estate property. His/her current investment portfoliooffers a 10% average annual rate of return with an 8% standard deviation. Estimated correlation coefficient of the current investment portfolio with the targeted Thailand investment is 0.69 (positive).

You are required to estimate the average return of the new portfolio (which include investment in Thailand) and the standard deviation of the portfolio return ((1+2) 3 points)