CISM Information Security Risk Management Practice Question
An organization calculates that the single loss expectancy (SLE) for a server failure is $10,000, and the annualized rate of occurrence (ARO) is 0.5. What is the annualized loss expectancy (ALE)?
⚠ Common exam trap
A common mix-up: candidates confuse ALE with SLE or incorrectly apply the ARO as a multiplier greater than 1, leading to answers like $20,000, instead of recognizing that an ARO of 0.5 means the loss is halved annually.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
$5,000
The annualized loss expectancy (ALE) is calculated by multiplying the single loss expectancy (SLE) by the annualized rate of occurrence (ARO). Given an SLE of $10,000 and an ARO of 0.5, the ALE is $10,000 × 0.5 = $5,000. This represents the expected annual financial loss from server failures based on the frequency and impact of such events.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
$5,000
Why this is correct
Calculation: $10,000 × 0.5 = $5,000.
- ✗
$10,000
Why it's wrong here
Misunderstanding of ALE.
- ✗
$20,000
Why it's wrong here
Incorrect multiplication.
- ✗
$2,500
Why it's wrong here
Incorrect division.
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JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This CISM practice question is part of Courseiva's free ISACA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CISM exam.