PFMP · Question #153
A new portfolio manager replaces a previous portfolio manager. The new portfolio manager decides to map the return on investment (ROI) of each project in the portfolio by evaluating each project over
The correct answer is B. of a risk seeker.. A risk seeker is more willing to accept high variability in outcomes, which manifests in wider ranges between best-case and worst-case estimates. By producing estimates with a consistently larger spread, the new manager is comfortable projecting higher potential upside (optimisti
Question
A new portfolio manager replaces a previous portfolio manager. The new portfolio manager decides to map the return on investment (ROI) of each project in the portfolio by evaluating each project over a 5-year period and to provide best-case and worst-case estimates for each project. The portfolio manager finds that the differences between the best- and worst-case estimates are consistently greater than the estimates that had been given by the previous portfolio manager. An explanation for this is that, compared to the previous portfolio manager, the new portfolio manager is more:
Options
- Aof a risk avoider.
- Bof a risk seeker.
- Coptimistic.
- Dpessimistic.
How the community answered
(25 responses)- A16% (4)
- B72% (18)
- C8% (2)
- D4% (1)
Explanation
A risk seeker is more willing to accept high variability in outcomes, which manifests in wider ranges between best-case and worst-case estimates. By producing estimates with a consistently larger spread, the new manager is comfortable projecting higher potential upside (optimistic best case) while also acknowledging greater downside exposure - a hallmark of risk-seeking behavior. A risk avoider (A) would produce tighter, more conservative estimates. Optimism (C) alone would raise both estimates uniformly, not widen the gap. Pessimism (D) would lower both estimates, also not widening the gap.
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