Question

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.

Value of bonds (100 @ $100)

5 years from maturity Y1= ($10000 x 3.25%) = 325 Y2= “ Y3= “ Y4= “ Y5= “ + $10000 TOTAL: $11625

Stock Value: 500 Shares @ $105.11 (10/27/2014) = $52,555.00

Is this right?

Answer 1

t * tt | • (10-5)years = 5 years • 3.25% of $ 1,00,000 = $3250 coupon rate each year. first year = $3250 Second yeay = $ 3250 Third year = $3250 fourth year = $3250 Fifth year = $ 103250 will be $1,00,000 + $3250 • The due amount for the bond for 5-year bond sales will be =) $ (3250 X4 ) + $ 103250 = $116,250 Froome the nature of the case, it is evident that the best position will call for selling the 500 apple stock Shaves rather than relying on the 100 Appie bonds, which will take another five years to mature and incuy move costs.