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Consider a portfolio whose continuously compounded return is normally distributed, with a mean of 10% and standard deviation of 21% per year. (a) What is

Consider a portfolio whose continuously compounded return is normally distributed, with a mean of 10% and standard deviation of 21% per year.

(a) What is the probability that, over a 10-year horizon, this portfolio will underperform a riskless investment whose continuously compounded return is 4%?

(b) What is the cost of perfect insurance against such a shortfall?

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