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You are concerned about the risk that a hurricane poses to your corporate headquarters. The building itself is valued at $ 15 million. There is a 10 percent likelihood that a hurricane will strike over the course of a year. It is determined that a hurricane would destroy approximately 50 percent of the building. What is the annualized loss expectancy (ALE)?
$ 1.5 million
$ 15 million
$ 7.5 million
$750,000
This problem wants you to calculate the ALE. ALE is SLEARO. For this scenario the ARO is 10% or 0.10. The SLE is $7.5 million. It is $15 million * 50% ( 15.50=7.5). Therefore the ALE here is 7.5 million * 10% (7.5*.10)= $750,000
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