Date Month t Month 2 Month 3 Month 4 *Rate of return -4.76 5.34 12.09 -2.98...

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Date Month t Month 2 Month 3 Month 4 *Rate of return -4.76 5.34 12.09 -2.98 yRate of Return -4.75 7.65 6.98 9.65 Calculate the covariance per month between the two companies. Show all your working. a) If a firm increases its financial risk by selling a large bond issue that increases its financial leverage explain this assumption? Also what is the relationship between risk and return. Explain with examples. (25 marks) Date Month t Month 2 Month 3 Month 4 *Rate of return -4.76 5.34 12.09 -2.98 yRate of Return -4.75 7.65 6.98 9.65 Calculate the covariance per month between the two companies. Show all your working. a) If a firm increases its financial risk by selling a large bond issue that increases its financial leverage explain this assumption? Also what is the relationship between risk and return. Explain with examples. (25 marks)

Answer rating: 100% (QA)

To calculate the covariance between the two companies rates of return we will first need to calculate the mean average rate of return for each company ... View the full answer