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.

Answer 1

Answer: For financing college education, You can sell your Apple Inc.'s stocks. You bought the stocks five years ago when the Apple's share price was at $90 now it is at $195 so if you sell the Apple's stocks now, You will get a proceeds of:

500 shares * $195 = $97500

$97500 is enough to pay fees for your education, remaining balance can be paid through your other savings.

Bonds have 10 years maturity so let the maturity complete, you will get a regular income in the form of coupon payments in bonds so hold it for another 5 years. Once you get a job and starts earning, you can invest some of amount into Apple's share if it comes down because fundamentally Apple Inc. is very good, it will give you higher returns in future.