Answer: 1.429

## Explanation We need to calculate β₂ using the formula: βᵢ = ρᵢ/σₚ From the given information: - Marginal VaR for Asset 2 = 0.440 - Portfolio VaR = USD 61.6 - Portfolio Value = USD 200 **Step 1: Use the relationship between Marginal VaR and β** The marginal VaR is related to β by: Marginal VaRᵢ = βᵢ × (Portfolio VaR / Portfolio Value) **Step 2: Calculate β₂** Marginal VaR₂ = β₂ × (Portfolio VaR / Portfolio Value) 0.440 = β₂ × (61.6 / 200) 0.440 = β₂ × 0.308 β₂ = 0.440 / 0.308 = 1.429 **Step 3: Verification** We can verify this makes sense: - β₂ = 1.429 means Asset 2 is more volatile than the portfolio - This aligns with Asset 2 having higher individual VaR (USD 46.6) compared to Asset 1 (USD 23.3) - The marginal VaR of 0.440 for Asset 2 is higher than Asset 1's 0.176, consistent with higher β **Therefore, β₂ = 1.429** This matches option B.

Author: LeetQuiz .