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Sophia Graniela FIN 320 Final Project Part 3 I. School Versus Work A. The school you would like to attend costs $100,000. To help finance your education, you need to choose whether or not to sell your 1,000 shares of Apple stock, 1,000 EE Savings Bonds (with $100 denominations and 4.25% coupon rate) that are five years from their 30-year maturity date, or a combination of both. Provide the appropriate data and calculations that you would perform to make this decision. Apple stocks = $116,140 (1,000 x 116.14) Savings Bonds= 25 years =$188,816.95 30 years (full maturity): $257,064.95 Source:
I would use a combination of both to finance my education because I would want to keep a portion of my stocks in case Apple grows a lot and I end up with a large gain. Since Apple is a very popular tech and software company, it’s very possible that the stock could rise in the next few years with new products etc and then it would be valuable to have some stocks left over. I also would want to keep some of my savings bonds because in 5 more years, I would end up with $68,248.00 more or $34,124.00 if I use half of my savings bonds for my education. It’s very smart in most cases to wait until savings bonds are at their full maturity in order to get their full value. B. What are the advantages and disadvantages of selling a combination of stocks and bonds? Be sure to support your answers. Selling a combination of stocks and bonds has many advantages. In this case, it’s smart because selling both stocks and bonds will allow me to be able to still reap the benefits of both in the long run. In 5 more years, I’ll be able to get half of my bonds at full maturity which will give me an extra $34,124.00 and if the Apple stocks grow, I will also make a profit on half of these if I decide to sell them in the future or keep them if the stock market is healthy. Selling all of my Apple stocks would only end up breaking even for me if they decline or lose their value in the stock market and since Apple is a large and popular company, it’s likely that they will grow at some point. By selling all of my savings bonds right now, I would be losing over $60,000 which I don’t want to do either. The only disadvantage of selling a combination of stocks and bonds would be if you are only selling half the stocks that are constantly declining and the company
wasn’t popular or had no competitive advantage and half of the security bonds which could offer you an extra $60,000. In that case, it would be much more beneficial to just sell the stocks and keep the bonds until their full maturity.