CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

A portfolio manager is concerned about not keeping up with the rate of inflation. His portfolio has a mean return of 9% with a variance of 144. If inflation is expected to be 3.5%, what is the shortfall risk (i.e., the portfolio return being less than 3.5%)?
A. 32.3%
B. 67.7%
C. 50%
Explanation: Based on the z transformation, z = (3.5 - 9)/12 = -0.4583. From standard normal tables, Prob(z <= -0.4583) = 0.3228, or 32.3%.

User Contributed Comments 5

User Comment
danlan It is less than 50% but greater than 0% so it can only be A.
aakash1108 Variance = 144 and therefore St.Dev = 12....
Shaan23 your good at taking square roots.
Cfrey you're good at spelling.
rojaslav Nice
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