Shortfall risk is the risk that portfolio’s return will fall below a specified minimum level of return over a given period of time. Safety first ratio is used to measure shortfall risk. It is calculated as: A portfolio with higher safety first ratio is preferred over a portfolio with a lower safety first ratio. An investor is considering two portfolios A and B. Portfolio A has an expected return of 10% and a standard deviation of 2%. Portfolio B has an expected return of 15% and a standard deviation of 10%. The minimum acceptable return for the investor is 8%…. Read More