FIN 320 Final Project 3.docx - Final Project Part III...

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Final Project Part III Southern New Hampshire University Giselle K Sampson Fin 320 Final Project III
Final Project Part III 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 any of your 500 shares of Apple stock you bought five years ago, 100 Apple bonds (3.25% coupon rate) that are five years from their 10-year maturity date, or a combination of both. Provide the appropriate data and calculations that you would perform to make this decision . There are five remaining years before the Apple stocks are matured and the coupon rate per year is equal to: 3.25% of $1000,000 = $3250. First year = $3250 Second year = $3250 Third year = $3250 Fourth year = $3250 Fifth year = $103,250 (100,000 + 3250). Therefore, the total amount due in cash for the 5-year bond sales will be $116,250 (3250 x 4) + $103250. The current price of Apple stock = $203.86 Number of shares in Apple Stock = 500 shares Market Value of stock = $203.86*500 shares = $101,930. There are advantages and disadvantages of selling combination of Stocks and bonds. For example, one advantage is that, “for most investors, diversifying with a combination of stocks and bonds is the best option. Diversification helps mitigate risk,” (Investopedia, 2019). Another advantage of selling combination is that it allows investors
Final Project Part III to judge the risk versus the return parity. “Risk parity is a portfolio allocation strategy using risk to determine allocations across various components of an investment portfolio,” (Investopedia, 2019). Disadvantages of selling a combination of stocks and bonds are that the transaction cost in selling both can be high and investors can get confused in which way they will invest.

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