Question 1 (10 Marks)

(i) Lauren started her business 6 years ago when she realised a niche opportunity in the home dcor market segment. Being a florist herself, she often encountered the request to make the bouquets or flower arrangements last longer. She researched and finally found a way to preserve flowers so that they can still look real and retain nearly their original vibrant colour. Her business started slow but picked up gradually and now it is at its rapid growth stage where she caters to northern suburb households, staging stylists, and interior designers. She is planning to expand her business in terms of production and establish a chain of retail stores in major shopping centres. List and explain three (3) possible financing options available to Lauren to raise capital needed. (6 Marks)

(ii) Kelsey as a retail investor enjoys investing but for a long time has only managed to invest in a single company due to insufficient savings. However, Kelsey has suddenly inherited some money from his family and can finally invest more money to create a diversified portfolio. How would diversification benefit Kelsey? Explain in the context of Portfolio Theory. (4 Marks)