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PMI PfMP Exam - Topic 2 Question 38 Discussion

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:
D) The best possible expected level of return for its level of risk
A) A mix of components---from high risk/high return to low risk/low return
B) The ability to quantify the value of risk in monetary terms
C) The possible overall portfolio value with the greatest possible benefits

PMI PfMP Exam - Topic 2 Question 38 Discussion

Actual exam question for PMI's PfMP exam
Question #: 38
Topic #: 2
[All PfMP Questions]

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:

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Suggested Answer: D

by Raymon at May 30, 2022, 03:29 AM

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Rex
10 months ago
Efficient Frontier is all about balancing risk and return, love it!
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Burma
11 months ago
Wait, can we really achieve that with budget cuts? Sounds risky!
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Dalene
11 months ago
I think the best expected return for its level of risk is the main goal.
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Harley
11 months ago
Totally agree, but quantifying risk in monetary terms is crucial too.
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Velda
11 months ago
A mix of components is key for diversification!
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Winfred
11 months ago
I practiced a similar question where the focus was on maximizing returns relative to risk. I think option D aligns best with that concept.
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Sylvia
11 months ago
I feel like option A makes sense too, since it mentions having a mix of components. But does that really define efficiency?
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Jacquline
11 months ago
I think the Efficient Frontier is all about balancing risk and return, so I’m leaning towards option D. It seems to capture that essence well.
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Laticia
11 months ago
I remember discussing how an efficient portfolio should maximize returns for a given level of risk. But I'm not entirely sure if that's the only factor to consider.
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Whitney
12 months ago
Okay, let me see... I think the answer is 1 day, but I'm not 100% certain. I'll review the relevant information to make sure.
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Barney
12 months ago
Okay, let me think this through. Pie charts, risk vs. return charts, and histograms are all commonly used in portfolio optimization, so the answer must be "None of the options." I'll go with that.
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Verlene
12 months ago
Okay, I think I know how to approach this. The key is to configure the right Cisco ACI settings to quickly identify and disable the interface causing the loop.
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Nell
12 months ago
I think we discussed the importance of security in mobile app testing, so maybe option C might be right? I'm not entirely sure though.
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