INFORMATION RATIO IS MEASURED AS THE ACTIVE RETURN DIVIDED BY THE TRACKING ERROR, WHICH THE IS STANDARD DEVIATION OF ACTIVE RETURNS

9. B is correct. Information ratio is measured as the active return divided by the tracking error,

which the is standard deviation of active returns. The tracking error of Greg's portfolio is

√36% = 6%. The information ratio is therefore 2%/6% = 0.33. Section 5.2. LO.e.