Examine the figure given below. What will be the expected monetary value of Risk C?

The correct answer is D. -$27,000. Expected Monetary Value (EMV) is calculated as: EMV = Probability × Impact. For Risk C (based on the referenced figure), the probability and impact values multiply to yield -$27,000. The negative sign indicates a threat (negative risk event). Choice B is incorrect because EMV…

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Question

Options

A-$113,750
B$175,000 if the risk event actually happens
C-$175,000
D-$27,000

How the community answered

(13 responses)

A
8% (1)
B
15% (2)
D
77% (10)

Explanation

Expected Monetary Value (EMV) is calculated as: EMV = Probability × Impact. For Risk C (based on the referenced figure), the probability and impact values multiply to yield -$27,000. The negative sign indicates a threat (negative risk event). Choice B is incorrect because EMV is a pre-event calculation of weighted value, not the actual cost if the event occurs. Choice A and C represent the raw impact or miscalculated values. The EMV formula weights the financial impact by the likelihood of occurrence, so the cost of a risk response should not exceed the EMV of the risk.

Topics

#Expected Monetary Value (EMV)#Quantitative Risk Analysis#Risk Impact#Risk Probability

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