This is an individual task. Please answer all questions.
Assume it is 1 January 2017. An investor has researched two possible bond investments, but an intermittent printer fault has caused some
important information to be missing from the printout. The latest coupon on each bond has just been paid. Each bond has a face, or par, value of
£1000. The investor assumes that each bond pays coupons annually.
Bond Coupon rate Maturity Current price Yield to maturity
ABC 3.50% 31 December 2022 ? 4.50%
XYZ 2.45% 31 December 2024 £898.45 ?
· i. Complete the table by calculating the current price of bond ABC and yield to maturity of bond XYZ (10 marks).
· ii. The investor subsequently realises that the printer had not detailed the fact that the ABC bond makes semi-annual coupon
payments. Recalculate the current price of the ABC bond. (10 marks)
iii. Analyze the answers in (i) and (ii) above as an investor. Which coupon option would you choose and why? (10 Marks).
iv. Assume for ABC corporation only, market interest rate increases, which results in increase YTM to 6.50%. What will be the revised current price
of the Bond? What will you deduce about the relationship between market interest rate and bond prices? (10 Marks)
Question 2:
In this question you are required to extract financial information on Texas Instruments which can be found in its annual report. You should refer in
particular to Texas Instruments’ 2020 consolidated financial statements. The notes to these statements may also be relevant.
You are required to:
a. use two appropriate methods to calculate the cost of equity for Texas Instruments (20 marks)
b. use two methods to calculate a cost of debt for Texas Instruments (20 marks)
c. If you have to select one of the methods from above, which one would you choose and why? (10 Marks)
d. If you would be prospective investor, would you invest in Texas shares or bonds? Specify the reason. (10 Marks)
Make sure you clearly describe and reference the source of the information used in your calculations. If you would like to use an additional
approach that requires external information, you should provide details of these additional sources and your reasons for using them.
Note the following:
· the risk-free rate is 1.14% p.a.
· the equity risk premium is 2.7% p.a.
In addition to your numerical work, you should provide an explanation of your methodology and justify your choice of inputs in the formula.
Remember to show all your calculations in detail.
Note: this question is not just testing your ability to derive calculations; it is also looking at your understanding of which financial information is
relevant for the calculations and how to deploy it.
Contextual Information:
The students can base their replies on wider research, even from the internet sources, however, all information should be appropriately referred
using Business School’s referencing style. Though students’ quantitative analysis will be same, however, justification, use of theory, paper structure
and background for recommendation is to be explained in detail for which you will get higher awards.
Submission is required in MS Word format. Students must have a cover page and word limit written on the same.
• Wordcount: No specific word limits will be applied to some of the questions in this TMA.
• Cover, Table of Contents, References and Appendix are excluded of the total wordcount.
• Font: Arial 12,5 pts.
• Text alignment: Justified.
• The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission and weightage: As per assessment details
It assesses the following learning outcomes:
· Outcome 1: categorize the value of bonds as per risk, maturity, rate of return;
· Outcome 2: Assess bonds yields within the current financial markets’ conditions;
· Outcome 3: Analyze the different types of stocks (preferred and common), asses their value and rate of return.
Rubrics (The professor is required to adapt this to the Task’s circumstances).
Exceptional 90-100 Good 80-89 Fair 70-79 Marginal fail 60-69
Knowledge &
Student demonstrates
excellent understanding of
key concepts and uses
vocabulary in an entirely
appropriate manner.
Student demonstrates
good understanding of the
task and mentions some
relevant concepts and
demonstrates use of the
relevant vocabulary.
Student understands the
task and provides minimum
theory and/or some use of
Student understands the task
and attempts to answer the
question but does not
mention key concepts or uses
minimum amount of relevant
Application (30%) Student applies fully
relevant knowledge from
the topics delivered in
Student applies mostly
relevant knowledge from
the topics delivered in
Student applies some
relevant knowledge from
the topics delivered in
class. Misunderstanding
may be evident.
Student applies little relevant
knowledge from the topics
delivered in class.
Misunderstands are evident.
Critical Thinking
Student critically assesses
in excellent ways, drawing
outstanding conclusions
from relevant authors.
Student critically assesses
in good ways, drawing
conclusions from relevant
authors and references.
Student provides some
insights but stays on the
surface of the topic.
References may not be
Student makes little or none
critical thinking insights, does
not quote appropriate
authors, and does not
provide valid sources.
Student communicates
their ideas extremely
clearly and concisely,
respecting word count,
grammar and spellcheck
Student communicates
their ideas clearly and
concisely, respecting word
count, grammar and
Student communicates
their ideas with some
clarity and concision. It
may be slightly over or
under the wordcount limit.
Some misspelling errors
may be evident.
Student communicates their
ideas in a somewhat unclear
and unconcise way. Does not
reach or does exceed
wordcount excessively and
misspelling errors are