The Component VaR (CVaR) approximates how much an individual position contributes to the total VaR of the portfolio. The formula for CVaR of asset $i$ is: $\text{CVaR}_i = w_i \times \text{Marginal VaR}_i$ where $\text{Marginal VaR}_i = z \times \frac{\partial \sigma_p}{\partial w_i} = z \times \rho_{i,p} \times \sigma_i$ Alternatively, we can compute it as: $\text{CVaR}_i = \text{Amount}_i \times z \times \rho_{i,p} \times \sigma_i$ Given:

• Alphabet stock value ($\text{Amount}_i$) = USD 18 million
• $z$-value for 99% confidence level $\approx 2.33$ (or 2.326)
• Correlation ($\rho_{i,p}$) = 0.54
• Alphabet stock standard deviation ($\sigma_i$) = 22% = 0.22

Plugging in the values: $\text{CVaR} = 18,000,000 \times 2.33 \times 0.54 \times 0.22$ $\text{CVaR} = 18,000,000 \times 0.276804 = \text{USD } 4.982 \text{ million}$

If we use more precise $z = 2.326$, we get: $\text{CVaR} = 18,000,000 \times 2.326 \times 0.54 \times 0.22 = \text{USD } 4.973 \text{ million}$ The closest answer aligns with using $z=2.33$, matching option B.