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**CFA Practice Question**

By investing $500,000 an investor desires $535,000 by the end of the year. The expected returns and standard deviation of returns from the investments are 9% and 17% respectively. What is Roy's Safety First Criterion ratio?

A. 6.2941

B. 2.4286

C. 0.118

**Explanation:**Roy's Safety First Criterion = (Expected return - minimum accepted return) / Standard Deviation = (9% - 35/500) / 0.17 = 0.118.

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**User Contributed Comments**
2

User |
Comment |
---|---|

chantal |
the safety ratio sb= (Expected return (9%)- desired min return (7%))/ 0.17= 0.118 Los 9, page 446 |

Mikehuynh |
The Roy's Safety First Criterion ratio is quite similar to the Sharpe ratio: [E(R) - Rf]/SD |