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CFA Level 1 Question of the Week - Quantitative Methods
An investor consults an investment manager to advise him regarding a certain type of the portfolios which would give him at least a 7% return on his investment (threshold return). The investment manager presents three portfolios exhibited in the following table:
| Portfolio A | Portfolio B | Portfolio C |
Expected Return | 19% | 23% | 36% |
Standard Deviation | 14% | 26% | 39% |
Using the Safety-First ratio assumption, the portfolio that is the
most suitable for the investor is:
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CFA Level 1 Question of the Week - Quantitative Methods 7 votes
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As provided in the following table, the Safety-First ratio of Portfolio A is the highest so it has the lowest probability of the portfolio returns falling below the investor's threshold level of 7%.
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