What is the shortfall risk


A portfolio manager is concerned about not keeping up with the rate of inflation. His portfolio has a mean return of 9% with a variance of 144. If the inflation is expected to be 3.5% what is the shortfall risk, i.e., the portfolio return being less than 3.5%?

A. 32.3%

B. 67.7%

C. 0%

D. 50%

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Finance Basics: What is the shortfall risk
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