EMV and contingency question

Dinah Young Project Manager / Software Asset Manager| Prince William County Springfield, Va, United States

One more sample question:
You are performing a quantitative risk analysis on your project, specifically evaluating the use of an off-the-shelf software versus the development of the software in house. There is a 30% probability that the in-house product will require additional maintenance, and that would cost the organization $9000. If a risk event has a 30% chance of occurring and the impact of the risk would be $9000, what does $2700 represent?
A. Risk value
B. The expected monetary value of the risk
C. The amount of the contingency to allocate
D. The present value

I chose C, but the correct answer was listed as B. Aren't both answers correct? Did I misread the question? You calculate the EMV to decide how much to add to the contingency budget.

Posted: Feb 6, 2018 1:52 PM

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Kevin Drake Perth, Western Australia, Australia

I would choose B
It is a specific for this
While c is a general and still to be accumulated and yet to happen.

Posted: Feb 6, 2018 2:00 PM (Updated by author: Feb 6, 2018 6:13 PM)

Kiron Bondale Retired | Mentor| Retired Welland, Ontario, Canada

Dinah -

B is the EMV for the risk which might be considered when doing reserve analysis but this is not a guarantee that it will be included in the final contingency reserves. As such, B is the most correct answer.

Kiron

...

1 reply by Dinah Young

Feb 06, 2018 5:12 PM

Dinah Young

...

That makes sense. Thank you.

Posted: Feb 6, 2018 3:46 PM

Dinah Young Project Manager / Software Asset Manager| Prince William County Springfield, Va, United States

Feb 06, 2018 3:46 PM

Replying to Kiron Bondale

...

That makes sense. Thank you.

Posted: Feb 6, 2018 5:12 PM

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EMV and contingency question

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