FIN 320 7-2 Final Project Submission, Part III.docx - FIN...

This preview shows page 1 - 4 out of 12 pages.

FIN 320 7-2 Final Project Submission, Part III 1 FIN 320 7-2 Final Project Submission, Part III Dorine Ament Southern New Hampshire University
FIN 320 7-2 Final Project Submission, Part III 2 School Versus Work Deciding whether or not to sell your stocks or bonds can be a tough decision. However, when dealing with the investments you can effectively assess whether it would be more beneficial to sell your stocks and bonds or keep them for a potentially larger return. At the close of the NASDAQ market on June 20, 2019, shares in Apple stock were valued at $199.46. This means that my 500 shares of Apple stock are worth $99,730 (199.46 x 500). According to Yahoo Finance (2019) when I purchased the stock five years ago, June 20, 2014, it was valued at $ 90.91 per share for a total portfolio of $45,455 (90.91 x 500). Since purchasing the stock five years ago my stock portfolio has increased $54,275 (99,730 - 45,455). Apple bonds are currently being traded at $102.31 with a yield of 2.65%. Taking into consideration that the coupon rate is 3.25%, the coupon rate multiplied by the total amount of Apple bonds, 100 would give us a yearly coupon discount of 3.25 (100 x 3.25% ). The sale of the Apples bonds would be a total of $95,367.44 (=PV(5,0.0265,5,1000)*100). There are many advantages and disadvantages to selling a combination of stocks and bonds. Since selling all of my stocks or bonds separately would not finance my tuition of $100,000 I would sell a combination of them. One advantage of selling a combination of the two would be that I would still have shares in stocks and bonds left over to continue building my diversified portfolio. “In a diversified portfolio, the assets don't correlate with each other. When the value of one rises, the value of the other falls. It lowers overall risk because, no matter what the economy does, some asset classes will benefit. That offsets losses in the other assets. Risk is also reduced because it's rare that the entire portfolio would be wiped out by any single event. A diversified portfolio is your best defense against a financial crisis.” (Amadeo, 2019). Another advantage would be that I would have stocks and bonds left over to sell if needed to assist me in
FIN 320 7-2 Final Project Submission, Part III 3 financing my everyday living expenses so that I would not have to work while attending school. Since bonds and stock prices can rise and fall based on supply and demand it is a good idea to have options available to you. “When stocks are on the rise, investors generally move out of bonds and flock to the booming stock market. When the stock market corrects, as it inevitably does, or when severe economic problems ensue, investors seek the safety of bonds. As with any free-market economy, bond prices are affected by supply and demand.” (Lioudis, 2019). An advantage to owning bonds is that they “have some advantages over stocks, including relatively low volatility, high liquidity, legal protection, and a variety of term structures.” (Boundless, n.d.).

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture