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FIN 320 7-2 Final Project Submission, Part III1FIN 320 7-2 Final Project Submission, Part IIIDorine AmentSouthern New Hampshire University
FIN 320 7-2 Final Project Submission, Part III2School Versus WorkDeciding 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 morebeneficial to sell your stocks and bonds or keep them for a potentially larger return. At the closeof the NASDAQ market on June 20, 2019, shares in Apple stock were valued at $199.46. Thismeans that my 500 shares of Apple stock are worth $99,730 (199.46 x 500). According to YahooFinance (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 fiveyears ago my stock portfolio has increased $54,275 (99,730 - 45,455). Apple bonds are currentlybeing traded at $102.31 with a yield of 2.65%. Taking into consideration that the coupon rate is3.25%, the coupon rate multiplied by the total amount of Apple bonds, 100 would give us ayearly 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 andbonds. 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 twowould be that I would still have shares in stocks and bonds left over to continue building mydiversified portfolio. “In a diversified portfolio, the assets don't correlate with each other. Whenthe value of one rises, the value of the other falls. It lowers overall risk because, no matter whatthe economy does, some asset classes will benefit. That offsets losses in the other assets. Risk isalso reduced because it's rare that the entire portfolio would be wiped out by any single event. Adiversified portfolio is your best defense against a financial crisis.” (Amadeo, 2019). Anotheradvantage 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 III3financing 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 tohave options available to you. “When stocks are on the rise, investors generally move out ofbonds and flock to the booming stock market. When the stock market corrects, as it inevitablydoes, or when severe economic problems ensue, investors seek the safety of bonds. As with anyfree-market economy, bond prices are affected by supply and demand.” (Lioudis, 2019). Anadvantage to owning bonds is that they “have some advantages over stocks, including relativelylow volatility, high liquidity, legal protection, and a variety of term structures.” (Boundless, n.d.).