TRACKING ERROR

Month Portfolio A Return Portfolio B Return Index

January 1.69% 1.12% 1.02%

February -0.36% -0.11% -0.12%

March -0.41% -0.16% -0.15%

April 0.91% 0.55% 0.54%

May 0.99% 0.50% 0.45%

June 2.11% 1.58% 1.61%

July -1.49% -1.04% -1.02%

August 1.34% 0.96% 0.87%

September -0.77% -0.47% -0.44%

October -0.42% -0.25% -0.21%

November 0.37% 0.08% 0.06%

December 0.51% 0.14% 0.13%

(a) Calculate the monthly mean, variance and standard deviation for the returns of each of the portfolios and for the index.

Mean

Variance

Standard Deviation

(b) Calculate the monthly and annualized tracking errors in basis points for each of the portfolios.

(c) Which portfolio is more actively managed? Why?