QUESTION 3. a. Gasgard is a country which is going through a historical structural change in its economy. Experts are ve

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QUESTION 3.
a. Gasgard is a country which is going through a historicalstructural change in its economy. Experts are very confident instating that the economic situation in Gasgard will not change forthe next five or ten years. Lokey, a stockbroker, gives his clientsthe following advice: “Avoid making any investments in Gasgardstocks (via Heimdal the national stock exchange of Gasgard),because the expected returns of stocks are believed to be below thehistorical average for the next five to ten years.” Is Lokey’sadvice sensible? Explain.
b. The risk of a portfolio is the variance of its return.However, the variance of the returns of an individual asset is notan appropriate measure of its risk. Discuss.