Chapter 11, Reading Question 10 The primary difference between sensitivity analy

Question

Chapter 11, Reading Question 10 The primary difference between sensitivity analysis and risk analysis is Sensitivity analysis includes a probabilistic estimate of the parameters, whereas risk analysis includes a percent change in the parameters Risk analysis includes a probabilistic estimate of the parameters, whereas sensitivity analysis includes a percent change in the parameters Sensitivity analysis includes determining the value of a parameter that makes two alternatives equivalent, whereas risk analysis includes a percent change in the parameters Risk analysis includes determining the value of a parameter that makes two alternatives equivalent, whereas sensitivity analysis includes a percent change in the pa rameters

Explanation / Answer

Sensitivity analysis is used to asses the impact of percent change in parameters values on the dependent variable whereas the risk analysis assigns probabilities to the future outcomes by assigning probabilistic estimate to the parameters and determines the expected future values.

Thus Risk analysis includes a probabilistic estimate of parameters whereas sensitivity analysis includes a percent change in parameters.choose second option.

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