To translate VaR from one time horizon to another under the assumption of independent and identically distributed returns:

VaR scaling formula: VaR(T) = VaR(1) × √T

Where T is the time horizon in days.

Given:

• 2-day VaR = $2.5 million
• We want 10-day VaR

First, find the 1-day VaR: 2-day VaR = 1-day VaR × √2 $2.5 million = 1-day VaR × 1.4142 1-day VaR = $2.5 million / 1.4142 ≈ $1.7678 million

Now calculate 10-day VaR: 10-day VaR = 1-day VaR × √10 = $1.7678 million × 3.1623 ≈ $5.590 million

Alternatively, using direct scaling: 10-day VaR = 2-day VaR × √(10/2) = $2.5 million × √5 = $2.5 million × 2.2361 = $5.590 million

Therefore, the appropriate translation is $5.590 million, which corresponds to option C.