Quantitative Risk Analysis

Correct Answer: A small difference between optimistic and pessimistic estimates

In PERT (Program Evaluation and Review Technique) analysis, when the optimistic and pessimistic estimates are close together, it indicates high reliability in the duration estimates. When there is a small gap between the optimistic and pessimistic estimates, it means that: - The experts have high confidence in their estimates - There is less uncertainty in the activity duration - The range of possible outcomes is narrow - The estimates are more precise and reliable The other options are incorrect because: - A large variance between most likely and expected time would actually indicate less reliability - The standard deviation being one-sixth of the range is a standard PERT calculation formula, not an indicator of reliability - Multiple peaks in a beta distribution would suggest uncertainty and competing scenarios, indicating less reliability in the estimates

Correct Answer: It accounts for uncertainty by considering multiple time estimates for each activity

PERT (Program Evaluation and Review Technique) analysis is valuable in project management because it incorporates three time estimates for each activity: optimistic, most likely, and pessimistic times. This probabilistic approach acknowledges real-world variability and uncertainty in project activities. The correct answer reflects PERT's key strength in considering multiple time estimates to create a more realistic project schedule. The other options are incorrect because: - Historical data alone cannot provide exact mathematical calculations of completion dates as each project has unique variables and uncertainties - PERT does not guarantee project success or merge estimates into a singular accurate prediction - it provides probabilistic estimates - Using only optimistic time estimates would create unrealistic schedules and increase project risk by underestimating durations

Correct Answer: Beta distribution weighted towards the most likely estimate

PERT (Program Evaluation and Review Technique) analysis uses a Beta distribution that is weighted towards the most likely estimate. Here's why: - PERT uses three time estimates: optimistic (O), most likely (M), and pessimistic (P) - The formula used in PERT: Expected Time = (O + 4M + P) / 6 - This formula gives four times more weight to the most likely estimate compared to the optimistic and pessimistic estimates - The Beta distribution is specifically chosen because it can be skewed and provides a better representation of real-world project scenarios The other options are incorrect because: - A normal distribution with equal weighting would not accurately represent the higher importance of the most likely estimate - Enhanced weighting on pessimistic scenarios would create an unrealistic bias towards worst-case scenarios - A triangular distribution would give equal weight to all estimates, not reflecting the higher significance of the most likely estimate