PFMP · Question #187
A portfolio manager is managing a portfolio as described in the following table: The CEO has requested that the portfolio manager calculate the health of the portfolio to achieve the benefits to the…
The correct answer is C. 1.01. The composite portfolio index is calculated as a weighted average of CPI and SPI, with cost weighted at 80% and schedule at 20%, yielding approximately 1.01.
Question
A portfolio manager is managing a portfolio as described in the following table:
The CEO has requested that the portfolio manager calculate the health of the portfolio to achieve the benefits to the organization. The organization has placed more importance on the CPI metric than the SPI metric, weighting cost at 80% and schedule at 20%. What is the composite index of the portfolio?
Exhibit
Options
- A0.97
- B0.98
- C1.01
- D1.10
How the community answered
(32 responses)- A3% (1)
- B6% (2)
- C75% (24)
- D16% (5)
Why each option
The composite portfolio index is calculated as a weighted average of CPI and SPI, with cost weighted at 80% and schedule at 20%, yielding approximately 1.01.
A result of 0.97 would indicate below-baseline performance; this value does not result from correctly applying the 80/20 weighting to the portfolio data provided.
A result of 0.98 is also below baseline and does not reflect the correct weighted calculation of the portfolio's CPI and SPI values.
The composite index formula is: (CPI x 0.80) + (SPI x 0.20). Applying the weights from the table data to the individual project CPI and SPI values and aggregating at the portfolio level produces a composite index of 1.01, indicating the portfolio is performing slightly above baseline on cost performance and near baseline on schedule when combined using the organization's stated weighting priorities.
A result of 1.10 overstates portfolio performance and does not result from the correct application of the 80% CPI and 20% SPI weighting formula.
Concept tested: Weighted composite performance index calculation for portfolio health
Source: https://www.pmi.org/pmbok-guide-standards/framework/portfolio-management
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