You only need to answer the question 4

3. Explain the difference between Active and Passive investments. How do fund managers attempt to generate abnormal returns? What are the costs associated with active fund management?

4. Based on your answer for question 3 above, explain Jensens Alpha and Tracking Error. Further explain the Information ratio and its usage. Finally, comment on the quality of fund managers performance and investment strategy for each of the four funds presented below:

Fund	Alpha	Tracking Error	Information Ratio	Comment
W	-0.5%	4.2%
X	0.25%	3.6%
Y	0.9%	6.8%
Z	-0.0.2%	1.3%