Question

Consider the following information on a portfolio, the market, the threshold level, and the risk-free rate:

Expected portfolio return	8.0%
Expected market return	2.7%
Expected risk-free rate of return	1.6%
Required threshold return	1.9%
Standard deviation of the portfolio return	4.2%
Standard deviation of the market return	3.8%

What is the safety-first ratio for this portfolio?

Answer 1

Roy's safety first ratio=(expected portfolio return-required threshold return)/standard deviaiton of portfolio=(8%-1.9%)/4.2%
=1.452380952