11．An investor currently has a portfolio valued at $700,000. The investor's objective is long-term growth, but the investor will need $30,000 by the end of the year to pay her son's college tuition and another $10,000 by year-end for her annual vacation. The investor is considering four alternative portfolios: Portfolio | Expected Return | Standard Deviation of Returns | 1 | 8% | 10% | 2 | 10% | 13% | 3 | 14% | 22% | 4 | 18% | 35% |
Using Roy's safety-first criterion, which of the alternative portfolios minimizes the probability that the investor's portfolio will have a value lower than $700,000 at year-end?
Select exactly 1 answers from the following:
A. Portfolio 1. B. Portfolio 2. C. Portfolio 3. D. Portfolio 4.
答案和详解如下！
Feedback: Correct answer: C Quantitative Methods for Investment Analysis, Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, and David E. Runkle (CFA Institute, 2004), pp. 257?60 2006 Modular Level I, Vol. I, pp. 420-423 Study Session 3-10-p define shortfall risk, calculate the safety-first ratio and select an optimal portfolio using Roy抯 safety-first criterion
The investor requires a minimum return of $40,000/$700,000 or 5.71 percent. Roy抯 safety-first model uses the excess of each portfolio抯 expected return over the minimum return and divides that excess by the standard deviation for that portfolio. The highest safety-first ratio is associated with Portfolio 3: (14% ?5.71%) / 22% = 0.3768.
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发表于 2006-11-22 10:36
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