PMI Exam PfMP Topic 2 Question 68 Discussion

Actual exam question for PMI's PfMP exam

Question #: 68
Topic #: 2

Working previously in the financial industry and studying finance and risk in graduate school, you are familiar with Markowitz's Efficient Frontier theory. Now assume you are the portfolio manager for a state government agency. Your agency has a reputation of being risk adverse but given recent budget cuts, you have convinced your executive team it needs to pursue some new programs and projects to demonstrate its benefits to the state. You decided to apply the Efficient Frontier concepts to show them the current state of its components in terms of risk and associated costs. You explained the portfolio is efficient if it has:

AA mix of components---from high risk/high return to low risk/low return

BThe ability to quantify the value of risk in monetary terms

CThe possible overall portfolio value with the greatest possible benefits

DThe best possible expected level of return for its level of risk

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Suggested Answer: D

by Nieves at Jul 09, 2024, 07:02 AM

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Rolf

4 months ago

D) The best possible expected level of return for its level of risk - It's like finding the sweet spot on the efficient frontier, the holy grail of investing!

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Raymon

3 months ago

Lauran: It's like hitting the jackpot in investing, getting the best of both worlds.

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Layla

3 months ago

That's the key to successful portfolio management, optimizing the expected level of return for the level of risk.

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Lauran

3 months ago

Absolutely, it's all about balancing risk and return to achieve the best possible outcome.

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Gail

4 months ago

I agree, finding that sweet spot on the efficient frontier is crucial for maximizing returns.

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Yolando

5 months ago

B) The ability to quantify the value of risk in monetary terms - Absolutely, this is a crucial aspect of applying the Efficient Frontier concept.

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Ty

5 months ago

I think quantifying the value of risk in monetary terms is crucial for making informed decisions.

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Alyce

5 months ago

C) The possible overall portfolio value with the greatest possible benefits - While portfolio value is important, the focus should be on optimizing the risk-return tradeoff.

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Maia

3 months ago

C) The possible overall portfolio value with the greatest possible benefits

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Maia

4 months ago

D) The best possible expected level of return for its level of risk

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Maia

4 months ago

A) A mix of components---from high risk/high return to low risk/low return

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Barney

5 months ago

I believe the portfolio should aim for the best possible expected level of return for its level of risk.

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Luther

5 months ago

A) A mix of components---from high risk/high return to low risk/low return - That's a good start, but the key is to optimize the return for the given level of risk.

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Shanice

4 months ago

D) The best possible expected level of return for its level of risk

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Vincent

4 months ago

A) A mix of components---from high risk/high return to low risk/low return

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Felix

5 months ago

I agree with Tenesha, having a mix of high risk/high return and low risk/low return components is important.

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Wilbert

5 months ago

D) The best possible expected level of return for its level of risk - This is the definition of an efficient portfolio according to Markowitz's theory.

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