An investor currently has a portfolio valued at $700,000. The investor’s objective is long-term growth, but she will need $30,000 by the end of the year to pay her son’s college tuition and another $10,000 by year-end for her annual vacation. The investor is considering three alternative portfolios:
Portfolio Expected Return Standard Deviation of Returns Safety-First Ratio
1 -- -- 0.2290
2 -- -- 0.3300
3 14% 22% --

Using Roy’s safety-first criterion, which of the alternative portfolios most likely minimizes the probability that the investor’s portfolio will have a value lower than $700,000 at year-end?