Project Risk Management Quantitative Risk Analysis 3

Question 1

A project manager wants to determine how much contingency reserve to add to the schedule. Which quantitative technique directly supports this decision?

Accepted Answer

Monte Carlo simulation

Answer

Monte Carlo simulation models schedule uncertainty across thousands of iterations, producing a probability distribution from which reserve levels can be derived.

Question 2

In a decision tree analysis, a chance node shows two outcomes: 60% chance of saving $30,000 and 40% chance of losing $20,000. What is the EMV of this node?

Accepted Answer

$10,000

Answer

EMV = (0.60 × $30,000) + (0.40 × −$20,000) = $18,000 − $8,000 = $10,000.

Question 3

Which of the following best describes the purpose of using a beta (PERT) distribution versus a triangular distribution in Monte Carlo simulation?

Accepted Answer

Beta/PERT weights the most likely value more heavily, producing a less extreme distribution

Answer

The PERT beta distribution gives four times the weight to the most likely estimate, resulting in a smoother, less extreme distribution than the triangular.

Question 4

A project's cost estimate has a standard deviation of $15,000 and a mean of $200,000. Assuming a normal distribution, what is the approximate range covering 68% of outcomes?

Accepted Answer

$185,000 to $215,000

Answer

One standard deviation above and below the mean (±$15,000) covers approximately 68% of a normal distribution: $200K ± $15K.

Question 5

During quantitative risk analysis, the project team discovers two risks are positively correlated. What implication does this have for the simulation?

Accepted Answer

When one risk is worse than expected, the other tends to be too, increasing overall variability

Answer

Positive correlation means risks move together, amplifying extremes and increasing the spread (variance) of the simulation's output distribution.

Project Risk Management Practice Test

Project Risk Management Practice Test

Project Risk Management Quantitative Risk Analysis 3