Project Risk Management Quantitative Risk Analysis 2 — Questions and Answers
Question 1: A project team runs a Monte Carlo simulation and finds the P80 completion date is 6 weeks later than the deterministic schedule. What does P80 mean?
- 80% of simulated runs finished on or before that date (Correct answer)
- 80% of risks have been identified and quantified
- The schedule has an 80% confidence interval of ±6 weeks
- 80% of project costs fall within the estimated range
Correct answer: 80% of simulated runs finished on or before that date
P80 (80th percentile) means 80% of simulation iterations completed by that date, giving an 80% probability of meeting it.
Question 2: Which input is NOT typically used when building a three-point estimate for quantitative risk analysis?
- Optimistic estimate
- Most likely estimate
- Stakeholder risk appetite (Correct answer)
- Pessimistic estimate
Correct answer: Stakeholder risk appetite
Three-point estimation uses optimistic, most likely, and pessimistic values; stakeholder risk appetite is a governance input, not a duration/cost estimate.
Question 3: A risk has a 40% probability of occurring and would cause a $50,000 cost overrun. What is its EMV?
- $20,000 (Correct answer)
- $50,000
- $12,500
- $90,000
Correct answer: $20,000
EMV = Probability × Impact = 0.40 × $50,000 = $20,000.
Question 4: When using a decision tree, what does a square node represent?
- A decision point where a choice must be made (Correct answer)
- A chance event with uncertain outcomes
- The calculated EMV of the branch
- A risk response action
Correct answer: A decision point where a choice must be made
Square nodes in a decision tree represent decision points (choices under the project team's control), while circles represent chance events.
Question 5: Sensitivity analysis in quantitative risk analysis is most commonly displayed using which tool?
- Tornado diagram (Correct answer)
- Pareto chart
- S-curve
- Scatter plot
Correct answer: Tornado diagram
A tornado diagram ranks risks by their relative impact on the project outcome, with the highest-impact variables at the top.
Question 6: A simulation shows cost outcomes ranging from $800K to $1.2M with a mean of $980K. The project budget is $1.0M. What is the approximate probability of staying within budget?
- Greater than 50% but less than 100% (Correct answer)
- Exactly 50%
- Less than 50%
- Cannot be determined without more data
Correct answer: Greater than 50% but less than 100%
Since the mean ($980K) is below the budget ($1.0M), more than half the distribution falls below $1.0M, so probability exceeds 50%.
Question 7: Which probability distribution is most appropriate when only the minimum, most likely, and maximum values of a risk variable are known?
- Triangular distribution (Correct answer)
- Normal distribution
- Poisson distribution
- Uniform distribution
Correct answer: Triangular distribution
The triangular distribution uses exactly three parameters: minimum, most likely (mode), and maximum, matching the three-point estimate inputs.
Project Risk Management Quantitative Risk Analysis 2
A project team runs a Monte Carlo simulation and finds the P80 completion date is 6 weeks later than the deterministic schedule.
What does P80 mean?