CAS-004 Governance, Risk, and Compliance Practice Question
A security analyst calculates the annualized loss expectancy (ALE) for a server. The single loss expectancy (SLE) is $50,000, and the annualized rate of occurrence (ARO) is 0.2. What is the ALE?
⚠ Common exam trap
CAS-005 often tests the confusion between the ALE formula and other combinations like SLE + ARO or SLE / ARO, leading candidates to pick a mathematically incorrect option.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
$10,000
The annualized loss expectancy (ALE) is calculated by multiplying the single loss expectancy (SLE) by the annualized rate of occurrence (ARO). Here, SLE = $50,000 and ARO = 0.2, so ALE = $50,000 * 0.2 = $10,000. This represents the expected monetary loss per year from the risk.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
$50,200
Why it's wrong here
Adding SLE and ARO treats the formula as SLE + ARO, which is arithmetically wrong; ALE is SLE multiplied by ARO, giving $10,000. Summing the two figures is tempting because both inputs appear in the calculation, but they are multiplied, not added.
- ✗
$2,500
Why it's wrong here
Dividing SLE by ARO inverts the ALE formula; $50,000 ÷ 0.2 gives $250,000, not $2,500. The division approach is tempting when ARO is below 1, because it appears to scale the loss down, yet ALE requires SLE × ARO.
- ✓
$10,000
Why this is correct
ALE is calculated by multiplying single loss expectancy by annualised rate of occurrence: $50,000 × 0.2 = $10,000. This quantifies the expected annual loss from the risk, matching the stem's supplied SLE and ARO values.
- ✗
$250,000
Why it's wrong here
Multiplying SLE by the reciprocal of ARO (1 ÷ 0.2 = 5) produces $250,000, which inflates rather than reduces the expected loss. Inverting ARO is tempting because a fractional rate feels like it should divide, but ALE is SLE × ARO = $10,000.
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JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official CompTIA exam blueprint
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