PMI-RMP · Question #128
You work as a project manager for BlueWell Inc. You are performing the quantitative risk analysis for your project. One of the project risks has a 50 percent probability of happening, and it will…
The correct answer is A. Negative $27,500. Expected Monetary Value (EMV) multiplies the probability of a risk event by its monetary impact. A 50% probability of a $55,000 threat yields an EMV of negative $27,500.
Question
You work as a project manager for BlueWell Inc. You are performing the quantitative risk analysis for your project. One of the project risks has a 50 percent probability of happening, and it will cost the project $55,000 if the risk happens. What will be the expected monetary value of this risk event?
Options
- ANegative $27,500
- BZero - the risk event has not yet occurred
- CNegative $26,000
- DNegative $55,000
How the community answered
(25 responses)- A84% (21)
- B4% (1)
- C4% (1)
- D8% (2)
Why each option
Expected Monetary Value (EMV) multiplies the probability of a risk event by its monetary impact. A 50% probability of a $55,000 threat yields an EMV of negative $27,500.
EMV = Probability x Impact = 0.50 x (-$55,000) = -$27,500. The result is expressed as negative because this is a threat, representing the expected cost the project should reserve for or plan around during quantitative risk analysis.
EMV is a forward-looking probabilistic calculation used during planning regardless of occurrence status; a risk that has not yet occurred still carries a non-zero EMV based on its probability and potential impact.
Negative $26,000 does not result from any valid EMV calculation using the given inputs of 50% probability and $55,000 impact.
Negative $55,000 would represent the full impact if the risk were certain (100% probability), not the expected value at only 50% probability.
Concept tested: Expected Monetary Value (EMV) calculation for risk events
Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok
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