Which one of the following represents an ALE calculation?

A.
Single loss expectancy x annualized rate of occurrence.

B.
Gross loss expectancy x loss frequency.

C.
Actual replacement cost – proceeds of salvage.

D.
Asset value x loss expectancy.

Explanation:
The Annualized Loss Expectancy (ALE) is the monetary loss that can be expected for an asset due to a risk
over a one year period. It is defined as:
ALE = SLE * ARO
where SLE is the Single Loss Expectancy and ARO is the Annualized Rate of Occurrence.
Single loss expectancy is one instance of an expected loss if a specific vulnerability is exploited and how it
affects a single asset. Asset Value × Exposure Factor = SLE.
The annualized rate of occurrence (ARO) is the value that represents the estimated frequency of a specificthreat taking place within a 12-month timeframe.
Incorrect Answers:
B: Gross loss expectancy and loss frequency are not terms used for calculations in Quantitative Risk Analysis.
C: Actual replacement cost and proceeds of salvage are not terms used for calculations in Quantitative Risk
Analysis.
D: Asset value x loss expectancy is not the correct formula to calculate the Annualized Loss Expectancy (ALE).

Harris, Shon, All In One CISSP Exam Guide, 6th Edition, McGraw-Hill, New York, 2013, p. 87