An investor wants to buy a condominium in

Florida. The value of her portfolio is

currently $1,000,000, and she needs
$100,000 in one year for the down
payment. She doesn’t mind decreasing her
capital as long as she has $950,000
remaining in her portfolio after the down
payment is made. She is considering two
new portfolios for her holdings.
The details on the two portfolios are:
 Expected Standard
Annual Return deviation of
Returns
Portfolio 1 17% 15%
Portfolio 2 12% 10%
Portfolio 3 8% 6%

According to Roy’s Safety-First criterion,

the portfolio she would prefer is:
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a. Portfolio 1 b. Portfolio 2
c. Portfolio 3
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