The following table shows the probabilities of different events that can occur during a software development project:
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Question:
The following table shows the probabilities of different events that can occur during a software development project:
| Event | Probability |
|---|---|
| A | 0.25 |
| B | 0.30 |
| C | 0.15 |
| D | 0.20 |
| E | 0.10 |
The financial impact of each event is as follows:
| Event | Financial Impact |
|---|---|
| A | -200,000 |
| B | -150,000 |
| C | -100,000 |
| D | 0 |
| E | 100,000 |
Assume that the financial impacts of the events are independent of each other. Calculate the expected value and standard deviation of the financial impact of the software development project.
a) What is the probability of a net financial loss for the project?
b) What is the minimum contingency fund that should be set aside to cover potential losses with 99% confidence?
Show all calculations and answers to 2 decimal places.
Expert Answer:
The detailed answer for the above question is provided below To calculate the expected value and standard deviation of the financial impact of the software development project we first need to calcula... View the full answer
Related Book For 
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
Posted Date:
