Question

Lighter Than Air Industries expects that it would lose $10 million if a tornado struck its aircraft operations facility. It expects that a tornado might strike the facility once every 100 years. What is the single loss expectancy for this scenario?

A. 0.01
B. $10,000,000
C. $100,000
D. 0.10

Answer 1

The single loss expectancy (SLE) for the scenario where a tornado strikes once every 100 years causing a $10 million loss is calculated by multiplying the value of the asset by the exposure factor, resulting in an SLE of $100,000.

Step-by-step explanation:

The question asks for the single loss expectancy (SLE) given a scenario where a tornado might strike an aircraft operations facility once every 100 years, causing a loss of $10 million. The SLE is a term used in risk management and represents the expected monetary loss every time a risk event occurs. To calculate the SLE, you multiply the value of the asset by the exposure factor. In this case, since we expect a tornado once every 100 years, the exposure factor is 1/100 or 0.01. Therefore, the SLE is $10 million multiplied by 0.01, which equals $100,000. The single loss expectancy for the scenario described is $100,000 (option C). To calculate the single loss expectancy, we multiply the potential loss ($10 million) by the probability of the event occurring (1/100). So, $10 million * 1/100 = $100,000.