CFA Practice Question

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CFA Practice Question

An analyst has a client with a $1,000,000 portfolio. The client may need to liquidate $100,000 of the portfolio at the end of a particular year. The client does not want to invade the initial capital of $1,000,000. The table below summarizes different allocations.

What is the shortfall level, RL?

A. 10%
B. 8%
C. 9%
Correct Answer: A

The shortfall level, RL, is 10%: 100 000/1000 000 = 10%. For any return less than 10%, the client will need to invade principal.

User Contributed Comments 5

User Comment
danlan Shortfall level is the threshold
epizi one has to be careful when more infortion is provided in a question than needed! What is that table for anyway?
Farina to distract you from what the question is asking, a common factor in a lot of CFA questions.
TammTamm I got this one correct. No z-score needed. :)
DonAnd TamTamm you are getting better at this! Impressive!
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