The Single Loss Expectancy is $1,000,000 and the Annual Rate of Occurrence is 20%. What is the Annualized Loss Expectancy?

The Single Loss Expectancy is $1,000,000 and the Annual Rate of Occurrence is 20%. What is the Annualized Loss Expectancy?

• A. $1,000,000
• B. $200,000
• C. $2,000,000
• D. $10,000

Answer: (B)

The key idea here is how to compute Annualized Loss Expectancy by combining how big a single loss would be with how often such a loss is expected to occur in a year. The Single Loss Expectancy (SLE) tells you the cost of a single incident, which is 1,000,000 dollars. The Annualized Rate of Occurrence (ARO) represents how many incidents you expect per year; 20% means 0.2 incidents per year on average. Multiply them to get the Annualized Loss Expectancy: 1,000,000 × 0.20 = 200,000. So the expected loss per year is $200,000. This aligns with the idea that if an event with a 1,000,000 loss happens about 0.2 times per year on average, the yearly expected impact is 200k. The other numbers would reflect misinterpretations of the rate or the amount per incident, not the correct ALE calculation with the given values.

The key idea here is how to compute Annualized Loss Expectancy by combining how big a single loss would be with how often such a loss is expected to occur in a year. The Single Loss Expectancy (SLE) tells you the cost of a single incident, which is 1,000,000 dollars. The Annualized Rate of Occurrence (ARO) represents how many incidents you expect per year; 20% means 0.2 incidents per year on average. Multiply them to get the Annualized Loss Expectancy: 1,000,000 × 0.20 = 200,000. So the expected loss per year is $200,000.

This aligns with the idea that if an event with a 1,000,000 loss happens about 0.2 times per year on average, the yearly expected impact is 200k. The other numbers would reflect misinterpretations of the rate or the amount per incident, not the correct ALE calculation with the given values.