PGMP · Question #172
If a risk has a probability of 60 percent and an impact of -$57,000 what will the expected monetary value of the risk event be?
The correct answer is A. -$34,200. Expected Monetary Value (EMV) is calculated by multiplying the probability of a risk event by its monetary impact: 0.60 x -$57,000 = -$34,200.
Question
If a risk has a probability of 60 percent and an impact of -$57,000 what will the expected monetary value of the risk event be?
Options
- A-$34,200
- B-$57,000
- C-9,500
- DYou will need to know the utility function of the organization to determine this.
How the community answered
(37 responses)- A76% (28)
- B8% (3)
- C3% (1)
- D14% (5)
Why each option
Expected Monetary Value (EMV) is calculated by multiplying the probability of a risk event by its monetary impact: 0.60 x -$57,000 = -$34,200.
The EMV formula is Probability x Impact, which here equals 0.60 x (-$57,000) = -$34,200. This is a straightforward arithmetic calculation that requires no knowledge of the organization's utility function or other factors - just the two given values.
-$57,000 is the raw impact value before probability weighting is applied, not the EMV.
-$9,500 does not result from any standard EMV formula using the given probability and impact values.
The utility function is relevant to complex decision theory and risk preference analysis, but standard EMV calculation requires only probability and monetary impact.
Concept tested: Expected Monetary Value (EMV) calculation for risk quantification
Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok
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