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1. Describe the following risk measures and explain why they might lead to different investment decisions: a. Variance. b. Shortfall probability. c. Lower partial moment.

1. Describe the following risk measures and explain why they might lead to different investment decisions: a. Variance. b. Shortfall probability. c. Lower partial moment.

2. Pacific Investment Management Company (PIMCO) is known for its expertise in managing fixed-income assets. The firm offers an equity mutual fund that actually holds bonds rather than stocks; the value added (alpha) over the benchmark (the S&P 500) comes from actively managing the bonds. Explain how this might be done.

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