Project Risk Management Quantitative Risk Analysis 4 — Questions and Answers
Question 1: Which of the following is the primary output of the Perform Quantitative Risk Analysis process according to the PMBOK Guide?
- Risk report updates with quantified overall project risk exposure (Correct answer)
- Risk register with probability-impact scores
- Prioritized risk list for qualitative analysis
- Risk response strategies for individual risks
Correct answer: Risk report updates with quantified overall project risk exposure
The main output is an updated risk report containing quantified overall project risk exposure, including probability distributions and key percentile values.
Question 2: A project is 60% complete. The original budget was $500K and the cost performance index (CPI) is 0.80. What is the estimate at completion (EAC)?
- $625,000 (Correct answer)
- $500,000
- $400,000
- $300,000
Correct answer: $625,000
EAC = BAC ÷ CPI = $500,000 ÷ 0.80 = $625,000.
Question 3: In quantitative risk analysis, what is the key difference between a risk's 'probability' and its 'impact'?
- Probability is the likelihood of occurrence; impact is the consequence if it occurs (Correct answer)
- Probability is measured in dollars; impact is measured as a percentage
- Probability applies only to threats; impact applies only to opportunities
- Probability is qualitative; impact is always quantitative
Correct answer: Probability is the likelihood of occurrence; impact is the consequence if it occurs
Probability measures how likely a risk event is to occur, while impact measures the magnitude of the effect on project objectives if it does occur.
Question 4: A Monte Carlo simulation of 10,000 iterations shows 2,500 runs exceeded the $1M budget. What is the probability of staying within budget?
- 75% (Correct answer)
- 25%
- 50%
- 90%
Correct answer: 75%
7,500 out of 10,000 runs stayed within budget, so the probability = 7,500 ÷ 10,000 = 75%.
Question 5: Which of the following is a limitation of using Expected Monetary Value (EMV) as the sole basis for risk decisions?
- EMV ignores risk aversion and the actual utility of outcomes to decision makers (Correct answer)
- EMV can only be used for cost risks, not schedule risks
- EMV requires Monte Carlo simulation to calculate
- EMV overweights low-probability, high-impact events
Correct answer: EMV ignores risk aversion and the actual utility of outcomes to decision makers
EMV treats all stakeholders as risk-neutral, ignoring the real-world fact that a large loss may be catastrophic even if statistically offset by expected gains.
Question 6: When performing quantitative risk analysis, which type of data is used to assign probability distributions to cost or schedule estimates?
- Historical project data, expert judgment, and three-point estimates (Correct answer)
- Lessons learned registers only
- Stakeholder interviews and risk appetite statements
- Work breakdown structure decomposition
Correct answer: Historical project data, expert judgment, and three-point estimates
Probability distributions are calibrated using historical data from similar projects, expert judgment, and three-point (optimistic/most likely/pessimistic) estimates.
Question 7: A risk manager identifies that Schedule Risk A and Cost Risk B are negatively correlated. What does this mean in practice?
- When Schedule Risk A worsens, Cost Risk B tends to improve, partially offsetting total exposure (Correct answer)
- Both risks will always occur simultaneously
- Negative correlation eliminates the need to model both risks
- The risks should be combined into one risk event for simplicity
Correct answer: When Schedule Risk A worsens, Cost Risk B tends to improve, partially offsetting total exposure
Negative correlation means the risks tend to move in opposite directions, so when one is worse than expected, the other is often better, reducing combined variability.
Project Risk Management Quantitative Risk Analysis 4
Which of the following is the primary output of the Perform Quantitative Risk Analysis process according to the PMBOK Guide?