hardMultiple ChoiceObjective-mapped
SSCP Practice Question: A financial institution uses a quantitative risk…
A financial institution uses a quantitative risk analysis to evaluate a new online payment system. The asset value is $5 million, the exposure factor is 40%, and the annualized rate of occurrence (ARO) is 0.5. What is the annualized loss expectancy (ALE)?
⚠ Common exam trap
ISC2 often tests the distinction between SLE and ALE, trapping candidates who stop after calculating SLE ($2,000,000) and forget to multiply by the ARO (0.5).
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
✓
$1,000,000
The annualized loss expectancy (ALE) is calculated as single loss expectancy (SLE) multiplied by the annualized rate of occurrence (ARO). SLE is asset value ($5,000,000) times exposure factor (40%) = $2,000,000. Then ALE = $2,000,000 × 0.5 = $1,000,000. This quantitative risk analysis formula is standard in financial risk assessments for payment systems.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
$1,000,000
Why this is correct
Correct calculation: SLE = $5M × 0.4 = $2M; ALE = $2M × 0.5 = $1M.
- ✗
$800,000
Why it's wrong here
This might result from miscalculating SLE as AV × ARO.
- ✗
$2,000,000
Why it's wrong here
This is the SLE, not the ALE.
- ✗
$2,500,000
Why it's wrong here
This might be AV × ARO.
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Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This SSCP practice question is part of Courseiva's free ISC2 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 SSCP exam.