# Quant Question Safety-First Ratio

On 1 Jan 2004, the value of an investor’s portfolio is 89K. the investor plans to donate 6000 to charity organization and pay 2000 to his insurance account on 31 Dec 2004, but meanwhile he does not want to year end portfolio value to be below 89K. If the expected return on the existing portfolio is 12 percent with a variance of 125, the safety first ratio that would be used to evaluated the portfolio based on Roy’s criterion is closest to: A0.236 B0.365 C0.546 D0.471 I got none of the above. (12%-8000/89000)/125^0.5 I would like to know you guys’ opinion on this.

{ 12 - [89 + 6 + 2) - (89)]/ 89 }/ SQRT(125) 3.01123596/11.1803 = 0.269334 Is it E?? - Dinesh S

I did something similar to Dinesh, so I am going to go with A

the answer did not count the 2000 insurance payment. so it gets D

wow…whats the reasoning behind that?

I got A (12-8.989) / 125^.5

(12-8.98) / 11.18 = .2701 I’d go with A

e. crap question

im getting 0.2692…so the closest is A??