Task

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 6.50% 31 December 2022	? 5.50%
XYZ 4.45% 31 December 2024	838.45 ?
i. Complete the table by calculating the current price of bond ABC and yield to maturity of bond XYZ 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. iii. Analyze the answers in (i) and (ii) above as an investor. Which coupon option would you choose and why? 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?

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 2019 consolidated financial statements. The notes to these statements may also be relevant. You are required to:

1. use two appropriate methods to calculate the cost of equity for Texas Instruments

2. use two methods to calculate a cost of debt for Texas Instruments

3. If you have to select one of the methods from above, which one would you choose and why?

4. If you would be prospective investor, would you invest in Texas shares or bonds? Specify the reason.