2. was working
Penelope was working on her homework when the doorbell rang.
Explanation:
The appropriate answer for the given fill in the blanks is was working. Because the other subjects given in the sentence are in past tense. So, the subject her is working and the right form in which the subject can be represented is using a ‘was’ before the subject which makes it perfect with the past tense.
Therefore the right option is ‘was working’.