Show all work if necessary. Answer all questions.

(A) Compute the tracking error from the following information:

Month 2001	Portfolio A's Return (%)	Lehman Aggregate Bond Index Return(%)
January	3.15	2.65
February	1.89	-0.10
March	1.15	0.52
April	-0.47	-1.60
May	1.71	0.65
June	1.10	0.33
July	1.04	2.31
August	1.70	1.10
September	0.66	1.23
October	2.15	2.02
November	-2.38	-1.61
December	-0.59	-2.20

(b) Is the tracking error computed in part (a) a backward-looking or forward-looking tracking error? Why?

(c) Compare the tracking error found in part (a) to the tracking error found for Portfolios A and B in Exhibits 25-1 on page 555 and 25-2 on page 556. What can you say about the investment management strategy pursued by this portfolio manager?