PFMP · Question #752
Review the following graphic. Assume now your portfolio is only 12% likely to meet is target of $41,000. Your Portfolio Review Board is dissatisfied in your management of the value of the overall…
The correct answer is B. $50,000. This question references a portfolio efficient frontier or probability-investment curve graphic. The scenario establishes the portfolio is currently only 12% likely to meet its $41,000 value target. The Portfolio Review Board Chair wants a 75% likelihood of meeting the target…
Question
Review the following graphic. Assume now your portfolio is only 12% likely to meet is target of $41,000. Your Portfolio Review Board is dissatisfied in your management of the value of the overall portfolio. You explain the current mix of components is too risk adverse, and additional investment is required. The Board Chair then wants the needed investment to have a 75% likelihood, and you state it is:
Exhibit
Options
- A$100,000
- B$50,000
- C$125,000
- D$65,000
How the community answered
(21 responses)- A10% (2)
- B76% (16)
- C10% (2)
- D5% (1)
Explanation
This question references a portfolio efficient frontier or probability-investment curve graphic. The scenario establishes the portfolio is currently only 12% likely to meet its $41,000 value target. The Portfolio Review Board Chair wants a 75% likelihood of meeting the target. Based on the referenced graphic, moving from the current low-probability position to a 75% likelihood requires an additional investment of $50,000. The other options ($100,000, $125,000, $65,000) correspond to different probability thresholds on the curve. Portfolio managers use such probabilistic investment models to communicate to governance boards the relationship between investment levels and the likelihood of achieving target portfolio value.
Community Discussion
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