PMI-RMP Question #460: Real Exam Question with Answer & Explanation

Question

A project has a S0S4 chance of a US$100 000 profit and a 40% chance of a US$100,000 loss. What is the expected monetary value for this project?

Options

• AUS$20.000 loss
• BUS$20,000 profit
• CUS$40,000 loss
• DUS$100,000 profit

Explanation

The expected monetary value (EMV) for this project can be calculated as follows: (0.6 x US$100,000) - (0.4 x US$100,000) = US$60,000 - US$40,000 = US$20,000 profit. The EMV of a project is the weighted average of the possible outcomes, which are a US$100,000 profit or a US$100,000 loss in this case. To calculate the EMV, we multiply the probability of each outcome by its monetary value, and then add them together. The formula is: EMV = (Probability of profit x Value of profit) + (Probability of loss x Value of loss) In this case, the probability of profit is 60%, and the value of profit is US$100,000. The probability of loss is 40%, and the value of loss is -US$100,000 (negative because it is a loss). Therefore, EMV = (0.6 x 100,000) + (0.4 x -100,000) EMV = 60,000 - 40,000 EMV = US$20,000 This means that the project has an expected monetary value of US$20,000 profit.

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