Which of the following statements accurately relates to the topic of risk?
A) The discount rate may be raised or lowered to allow for the risk of a project, the extent of the risk premium being based on indisputable theory.
B) Risk is unpredictable, and thus cannot be allowed for in project planning.
C) Risk can be quantified using objective probabilities that can be defined mathematically and inferred from historical data.
D) Risk is the probability of an outturn being less than anticipated.

Question

Quizplus · Accepted Answer

Risk can be quantified using probability theory, and historical data can be used to estimate objective probabilities. A risk premium can then be applied to account for the risk of a project. Option A incorrectly implies that the risk premium is based on indisputable theory, while option B incorrectly suggests that risk cannot be allowed for in planning. Option D defines risk as the probability of an outturn being worse than expected, which is not necessarily accurate as risk can also refer to positive outcomes being greater than anticipated.

Which of the Following Statements Accurately Relates to the Topic