CRISC IT Risk Assessment Practice Question
A company uses the FAIR model to perform a quantitative risk analysis. The threat event frequency (TEF) is estimated at 10 per year, vulnerability (V) is 0.5, and loss magnitude (LM) per event is $50,000. What is the annualized loss expectancy (ALE)?
⚠ Common exam trap
The trap is omitting the vulnerability factor and simply multiplying TEF by LM, or misplacing decimal points when converting percentages.
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
✓
$250,000
In the FAIR model, ALE = TEF × Vulnerability × Loss Magnitude. Here, TEF = 10, V = 0.5, LM = $50,000. So ALE = 10 × 0.5 × $50,000 = $250,000. This represents the expected annual loss from the risk event.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
$25,000
Why it's wrong here
ALE is TEF × V × LM, giving $250,000; $25,000 halves LM (0.5 × 50,000) and omits the ten annual threat events. Vulnerability-weighted single-event loss is tempting because it captures expected loss per attempt, but it is correct only when threat event frequency is one per year.
- ✗
$50,000
Why it's wrong here
ALE is TEF × V × LM, giving 10 × 0.5 × 50,000 = $250,000; $50,000 equals loss magnitude alone, omitting frequency and vulnerability. Loss magnitude per event is tempting because it is the visible dollar figure, but it is the correct answer only when calculating single-event loss, not annualised expectancy.
- ✗
$500,000
Why it's wrong here
ALE is TEF × V × LM, giving $250,000; $500,000 multiplies TEF by LM (10 × 50,000) while ignoring vulnerability, so it overstates expected loss. That product is tempting as a rough exposure figure, but it is correct only when vulnerability equals 1.0, meaning every threat event succeeds.
- ✓
$250,000
Why this is correct
FAIR derives annualised loss expectancy by multiplying threat event frequency, vulnerability and loss magnitude. Here 10 events per year multiplied by 0.5 vulnerability gives five loss events annually, and five multiplied by $50,000 yields $250,000, satisfying the quantitative calculation the stem requests.
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Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official ISACA exam blueprint
This CRISC 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 CRISC exam.