PMI Risk Management Professional (PMI-RMP) — Question 53

A project has a 60% 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?

Answer options

• A. US$20,000 loss
• B. US$100,000 profit
• C. US$40,000 loss
• D. US$20,000 profit

Correct answer: D

Explanation

The expected monetary value (EMV) is calculated by multiplying the potential outcomes by their probabilities. In this case, the EMV is (0.6 * 100,000) + (0.4 * -100,000) = 60,000 - 40,000 = 20,000, which means the project has an expected value of US$20,000 profit. The other options do not accurately reflect this calculation.