PFMP · Question #138
While developing the portfolio management plan, which part of the plan will aid the portfolio manager in determining the efficient frontier?
The correct answer is B. Portfolio prioritization model. The portfolio prioritization model within the portfolio management plan is the tool used to determine the efficient frontier by scoring and ranking components based on value and risk.
Question
While developing the portfolio management plan, which part of the plan will aid the portfolio manager in determining the efficient frontier?
Options
- AChange control and management
- BPortfolio prioritization model
- CManaging strategic change
- DBalancing portfolio and managing dependencies
How the community answered
(34 responses)- A3% (1)
- B88% (30)
- C3% (1)
- D6% (2)
Why each option
The portfolio prioritization model within the portfolio management plan is the tool used to determine the efficient frontier by scoring and ranking components based on value and risk.
Change control and management addresses the process for approving and implementing changes to the portfolio, not the scoring and ranking of components used to determine optimal portfolio composition.
The portfolio prioritization model uses weighted scoring criteria to evaluate and compare components on dimensions such as strategic value, return on investment, and risk - this quantitative ranking mechanism enables the identification of the efficient frontier, which represents the optimal portfolio composition that maximizes value for a given level of resource investment and risk exposure.
Managing strategic change addresses how the portfolio responds to shifts in organizational strategy, not the quantitative optimization model used to identify the efficient frontier.
Balancing the portfolio and managing dependencies is an activity that follows the prioritization model's identification of the efficient frontier, not the mechanism for determining it.
Concept tested: Portfolio prioritization model and efficient frontier determination
Topics
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