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.
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 |