(b) Suppose Company A wants to issue bonds to fund the new building development which offers 4% interest rate on the company bonds. If the inflation rate is 5%, what is the real rate of return? (correct to 4 decimal places) (4 marks)

(e) If the correlation between Stock A and Stock B is equal to +0.15, how do you interpret this number? If the covariance between Stock A and Stock C is equal to -0.32, how do you interpret this number? (5 marks)