FIN-320 Final Project Part 3.docx - FIN 320 Principles of...

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FIN 320: Principles of Finance Final Project FIN-320 Final Project Part III Southern New Hampshire University
FIN 320: Principles of Finance Final Project 2 The results of both sections of my employment examination have finally been received, and I was offered the position. I have a few important decisions to make before I can formally accept or decline the position. The school I would like to attend costs $100,000. To help finance my education, I need to choose whether or not to sell any of my 500 shares of Apple stock I bought five years ago, 100 Apple bonds (each with $1,000 face value and a 3.25% coupon rate) that are five years from their 10-year maturity date, or a combination of both. As of August 16, 2019, Apple stock is worth $206.50 per share (Yahoo Finance, 2019). If I were to sell all of my Apple stock today, I would receive a total of $103,250.00 ($206.50 x 500). I used Market Insider to find out how much my Apple bonds are worth. The bonds have a 1.88% market yield and the interest is paid semi-annually (Market Insider, 2019). The coupon rate is 3.25% they are still five years left to the maturity date. Using Excel, I used a formula (=PV (RATE, NPER, PMT, FV) to calculate the present value. The actual calculation is =PV (0.0094,10,16.3,-1000) which equals $997.44 per bond. Since I have 100 Apple bonds, I would get $99,743.63 if I were to sell them today (WBIII.A, 2019). I would either have to see all of my Apple stock or a portion of both stock and bonds in order to have enough to pay for my education. PV(RATE,N,PMT,FV) RATE NPER PMT FV PPY 1.88% 5 3.25% -1000 2 0.0094 % 10 16.3% -1000 $997.44 Current value per bond $99,743.63 Value for 100 bonds The main advantage of selling a combination of stock and bonds to pay for school is that I can still have higher risk shares in the market as well as lower risk bonds, thus diversifying my investments with Apple. If Apple stock price increase I will reap the advantage, but if Apple stocks plummet, I do not lose everything all at once. Diversification is better because it helps mitigate risk. The disadvantage of having a combination of both stock and bonds is if one outperforms the other. For example, if the stock price increased multiple times within the year,
FIN 320: Principles of Finance Final Project 3 then I would have made a much smaller profit if I sold all my bonds and kept all my shares. A combination of both the high-risk stocks and low-risk bonds comes out to a medium-risk investment.

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