FIN 320 part 3.docx - 1 I School Versus Work A The school...

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1I. School Versus WorkA. 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 (each with a $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. Provide the appropriate data and calculations that you would perform to make this decision.As of August 14th2020 my 500 Apple stock is selling for $459.63 per share for a gross net worth of $229,815. 459.63 x 500= 229,8153.25% of 100,000 equals a $3,250 coupon rate each year.First Year- $3,250Second Year- $3,250Third Year-$3,250Fourth Year-$3,250Fifth Year- $3,250Fifth year will be $100,000 plus the $3,250 coupon rate making it $103,250. The due amount for the 5-year bond sales will be ($3,250 x 4) + $103,250= $116,250. From the provided data and our calculations, it is evident the best financial move would be to sell the 500 Apple stock shares rather than relying on the 100 Apple bonds. The bonds will take another five years to mature and will accrue more costs. B.What are the advantages and disadvantages of selling a combination of stocks and bonds? Be sure to support your answers.
2One advantage to selling a combination of stocks and bonds is that chances are Apples stock is going to go up. By selling all of the Apple stock now, there will likely be a loss. The potential loss will not be as large by only selling a portion of them. Another advantage is that your portfolio will be diversified and risks will be limited. The disadvantage is that having to sell Apple stock is not an option. It will be required as the present value of the bonds will not cover the entire cost of schooling. Another disadvantage of selling a combination of stocks and bonds are that there will be high transaction cost involved in selling both.C. Suppose that you choose to sell your stocks, bonds, or a combination of both. What is your choice, and what is your financial reasoning behind this choice? Consider supporting your answer with quantitative data.My choice would be the combination of both, to take half amount by selling the bonds and half amount by selling the apple stock. I believe keeping half of Apple Stocks would be a smart move, as Apple has been a productive stock that has steady increased growth. By keeping half of

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