First, we determine the portfolio's unexpected loss ($UL_p$). The formula for a two-asset portfolio's unexpected loss is: $UL_p = \sqrt{UL_1^2 + UL_2^2 + 2 \times \rho \times UL_1 \times UL_2}$

Where:

• UL_1 = UL_2 = \`5.5`$ million
• $\rho = 0.28$

$UL_p = \sqrt{5.5^2 + 5.5^2 + 2 \times 0.28 \times 5.5 \times 5.5}$ $UL_p = \sqrt{30.25 + 30.25 + 2 \times 0.28 \times 30.25}$ $UL_p = \sqrt{60.50 + 16.94} = \sqrt{77.44} = 8.80 \text{ million}$

Since the two loans are identical in terms of exposure, PD, LR, and standard deviation, their risk contributions to the portfolio's unexpected loss must be equal. Therefore, the risk contribution of each asset is simply half of the portfolio's total unexpected loss: RC = \frac{UL_p}{2} = \frac{8.80}{2} = \`$4.40` \text{ million}

Alternatively, using the exact risk contribution formula: RC_1 = UL_1 \times \frac{UL_1 + \rho \times UL_2}{UL_p} = 5.5 \times \frac{5.5 + 0.28 \times 5.5}{8.80} = 5.5 \times \frac{7.04}{8.80} = \`$4.40` \text{ million}

Both methods yield $4.40 million.