The Table Below Provides Returns on a Portfolio Along with Returns

The table below provides returns on a portfolio along with returns for the corresponding benchmark index for the past eight quarters. The table also provides the difference between portfolio returns and the benchmark index, the average of these differences over the past eight quarters and the standard deviation of these differences. $\begin{array}{cccc}\text { Period } & \text { Portfolio } & \text { Index } & \text { Difference } \\\hline 1 & 0.05 & 0.027 & 0.023 \\2 & -0.036 & -0.046 & 0.010 \\3 & 0.022 & 0.019 & 0.003 \\4 & 0.012 & 0.022 & -0.010 \\5 & -0.003 & -0.001 & -0.002 \\6 & -0.023 & -0.03 & 0.007 \\7 & 0.089 & 0.081 & 0.008 \\8 & -0.008 & 0.006 & -0.014\\\text { Average } &&& 0.003\\\mathrm{SD} &&&0.011789\\\end{array}$ The annualized tracking error for this period is

A) 2.36%
B) 4.08%
C) 2.89%
D) 3.33%
E) 1.18%

Correct Answer:

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