What Is the ALE for a $15,000 Loss Occurring Twice in Three Years?
A security analyst has determined that a security breach would have a financial impact of $15,000 and is expected to occur twice within a three-year period. Which of the following is the ALE for this risk?
Community Votes
100% of anonymous learners picked answer B. Votes are pick records left by other test-takers — they are not the verified answer.
Community Insight
This question tests quantitative risk analysis using ALE = SLE × ARO; the trap is multiplying the loss by two and stopping at the three-year total ($30,000) instead of converting the frequency into a single-year rate.
Annualized loss expectancy (ALE) is the yearly cost of a risk, calculated as single loss expectancy (SLE) multiplied by the annualized rate of occurrence (ARO). With a $15,000 breach impact occurring twice in three years, ARO is 2 ÷ 3 ≈ 0.67 and the ALE works out to roughly $10,000, making option B correct.
The most common wrong choice is $30,000 (option D): candidates multiply the $15,000 single loss by the two occurrences and forget that ALE is an annual figure, so the three-year total must be normalized by dividing by three years.
Community Discussion (3 comments)
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Expert Analysis
Why the Answer Is Correct
ALE is defined as SLE × ARO, where SLE is the loss from a single realized event and ARO is how many times per year that event is expected to happen. Here the SLE is given directly as $15,000 ("a financial impact of $15,000"), and the ARO must be derived from the scenario: two occurrences over a three-year period means 2 ÷ 3 ≈ 0.667 events per year. Multiplying $15,000 × 0.667 produces $10,005, which is stated as approximately $10,000 across the answer choices, so option B is the only defensible figure. Some candidates get $10,050 by rounding ARO to 0.67 first; the difference is trivial and still lands on $10,000. The key doctrine is that ALE is always expressed per year, never as a raw multi-year total.Why the Other Options Are Wrong
Option D, $30,000, is the three-year cumulative exposure ($15,000 × 2) and is not annualized — it answers a different question than the one asked. Option C, $15,000, is simply the given SLE with no frequency factor applied at all, which ignores the stated expectation of two breaches in three years. Option A, $7,500, is half the SLE and would only result from an ARO of 0.5 (one occurrence every two years), which contradicts the "twice within a three-year period" condition; it is a distractor that exploits mixing up SLE and ALE. Because the scenario supplies both a loss magnitude and a frequency window, only B correctly combines the two elements.Community Comment Notes
Every recorded vote on this question selected B, and the reasoning in the comments is consistent with the official formula. gingergroot describes a "Simpler calculation without decimals: $15,000 SLE x 2 occurrences = $30,000" followed by dividing by three years to reach $10,000, which is the same math expressed as a three-year total. Fourgehan writes it as "ALE=SLE×ARO" with an ARO of 0.67 and notes that rounding to the nearest significant figure gives approximately $10,000, addressing the small $10,005/$10,050 discrepancy directly. s_plus shows the raw arithmetic (2 ÷ 3 = 0.666666, times $15,000) to confirm the same result, so the community consensus and the computed answer agree with the source key here.Official Reference
Exam Strategy
For any quantitative risk question, write down the formula (ALE = SLE × ARO) before touching the numbers and force the answer into per-year units. When the scenario gives occurrences over a multi-year window, convert it to an annual rate first (2 ÷ 3 ≈ 0.67), then multiply; the un-divided multi-year total will almost always appear as a distractor.
Frequently Asked Questions
Why is $30,000 (option D) not the ALE in this scenario?
$30,000 is the total expected loss across the whole three-year period ($15,000 × 2 events). ALE is an annualized figure, so that total must be divided by three years to give about $10,000.
How do I calculate the ARO when the question says twice in three years?
ARO is the expected number of occurrences per year: 2 ÷ 3 ≈ 0.67. Multiply that by the $15,000 SLE and you get roughly $10,000, which is option B.
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