the information below Y  relating to the monthly rates of return for two companies X and Y over a period of 4 months:  1                                                                                               xRate of return            yRate of Return   Date  Month 1  -4.76  -4.75  Month 2  5.34  7.65  Month 3  12.09  6.98  Month 4  -2.98  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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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the information below Y  relating to the monthly rates of return for two companies X and Y over a period of 4 months: 

1

 

                                                                                            xRate of return            yRate of Return   Date 

Month 1 

-4.76 

-4.75 

Month 2 

5.34 

7.65 

Month 3 

12.09 

6.98 

Month 4 

-2.98 

9.65 

 

 

 Calculate the covariance per month between the two companies. Show all your working.

 

  1. 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.
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