A large pension fund requires that the fund's managers do not breach the 2% tracking error limit at any point in time. A fund manager's performance for the most recent period is summarized below:

• Average return: 2.8%

• Volatility of returns: 1.9%

• Average return in excess of the benchmark (average active return): 0.6%

• Volatility of active returns: 1.7%

If the current risk-free interest rate is 1.2%, which of the following is correct?