first question of reading 29 eoc. there are six bonds you need to find the tracking risk of, but i don’t follow their computations. for example, the first bond: port return is 14.1% and benchmark return is 13.7%, for an active return of .4%. But then in the (active return - average return)^2, I get .09%, and the book says .0009% (the average active return is .1%). This follows through all of them. Does anyone know why there are two extra zeros for each of their calculations (i am taking into account percentages). in the end, i get a tracking error of .02828%, and they show .2828%. ahh…
taketwo, (0.004-0.001)^2 = 0.000009 (five zero after decimal place)