The shortfall risk is? And how to cauculate? The question says portfolio have to earn 7%, This should be the threshold return, The expected return and standard deviation of the portfolio is 15% and 4%. I don’. Know why the answer cauculate z value as ( 0.07-0.15)/0.04=-2 Shouldn’t I use the threshold % as the benchmark ? And it then should look up the z table fo. The answer? Will we need to look at z tables or other tables in the exam?
Once again, this is simply the definition of Roy’s Safety-First criterion. You have to know its definition, and how to interpret it (higher number is better).
There is no need to look up anything in a Z-table for this; the number as given is Roy’s.
If you need a Z-table or T-table, you will be given it (or, rather, a portion of it). However, the common values from a Z-table – 68%, 90%, 95%, 99% – you are expected to know without a table.