Consider the information below relating to the monthly rates of return for two companies X and Y over a period of 4 months:   Y   2                                                                                                         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     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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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.