If SLE is $2,000 and ARO is 0.25, what is ALE?

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Multiple Choice

If SLE is $2,000 and ARO is 0.25, what is ALE?

Explanation:
The concept here is how to find the expected annual loss. ALE is obtained by multiplying the potential loss from a single incident (SLE) by how often that incident happens in a year (ARO). So you’re averaging the cost over every year. With a single loss expectancy of $2,000 and an annualized rate of occurrence of 0.25, the calculation is 2,000 × 0.25 = 500. This means an expected loss of about $500 per year, since 0.25 incidents per year equate to one incident every four years, averaging out to 500 per year. Thus the annual loss expectancy is $500.

The concept here is how to find the expected annual loss. ALE is obtained by multiplying the potential loss from a single incident (SLE) by how often that incident happens in a year (ARO). So you’re averaging the cost over every year.

With a single loss expectancy of $2,000 and an annualized rate of occurrence of 0.25, the calculation is 2,000 × 0.25 = 500. This means an expected loss of about $500 per year, since 0.25 incidents per year equate to one incident every four years, averaging out to 500 per year.

Thus the annual loss expectancy is $500.

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