Fixed income investment can range from a passive investment strategy to an active investment strategy in an attempt to seek alpha return from the bond market. Each strategy has its own risks in achieving investors return expectations.

a$)$ Differentiate a passive bond investment strategy to an active bond investment strategy.

b$)$ Interest rates on the markets has been at its lowest level for the past few years. In May $2022,$ the US Federal Reserve announced a $0\mathrm{.}5\%$ interest rate hike $$ its highest increase in more than $20$ years. The US move comes as a number of other countries cut lending rates to deal with rising prices.

The general expectations are for further interest rates hikes during the year. Critically explain how you can use an active investment strategy to optimize return based on interest rate expectations as explained above.