First, we calculate the daily mean and standard deviation for both arithmetic and geometric returns assuming 252 trading days per year.

1. Normal VaR (Using arithmetic returns):

• Daily mean ($\mu$) = $16% / 252 = 0.06349%$
• Daily standard deviation ($\sigma$) = $27% / \sqrt{252} = 1.7008%$
• Critical value ($Z$) for 95% confidence level $\approx 1.65$ (or 1.645)
• Using 1.65, 1-day 95% normal VaR = $Z \times \sigma - \mu = 1.65 \times 1.7008\% - 0.06349\% = 2.8063\% - 0.06349\% = 2.7428\% \approx 2.74\%$

2. Lognormal VaR (Using geometric returns):

• Daily geometric mean ($\mu_g$) = $13% / 252 = 0.05159%$
• Daily geometric standard deviation ($\sigma_g$) = $29% / \sqrt{252} = 1.8268%$
• Geometric return cutoff ($R_{geom}$) = $\mu_g - Z \times \sigma_g = 0.05159\% - 1.65 \times 1.8268\% = -2.9626\%$
• 1-day 95% lognormal VaR = $1 - \exp(R_{geom}) = 1 - \exp(-0.029626) = 1 - 0.970808 = 0.029192 \approx 2.92%$

Therefore, Option C is correct.