corporate finance decisions

Sample banner

0 / 5. 0

corporate finance decisions

Category: Problem solving

Subcategory: Finance

Level: College

Pages: 1

Words: 275

Corporate Finance Decisions
Name
Institutional Affiliation
Question 1: School versus Work
A. Selling shares and bonds
Response
Apple stock price (12th Dec, 2018) = $170.76
No. of shares of Apple stock = 500 shares
The Apple stocks can thus be valued at the following amounts:
Apple stock market value
= $170.76*500 shares
= $85,380
Bonds held = 100
Assuming a denomination of $1000
Bonds Coupon Rate = 3.25%
No. of years to maturity
= 10 Years -5 years
= 5 years
Let us assume the rate equal to the coupon rate
When coupon rate is equal to the rate, the price will be the same as the face value
= $100*1000 bonds
= $100,000.
Market Price of bonds
= $100,000
Amount to forego 0.00325*100000
=3250*remaining years (5) years
=$16,250
It would be appropriate to take half amount by selling the bonds and the half amount by selling the Apple stock for the purposes of diversification.
A. Advantages and disadvantages of selling a combination of stocks and bonds
Response
Combining both the stocks and bonds ensures that I have diversified in my securities and even hedges the risks. It ensures that I will not miss out on the growth of the Apple shares while the incomes from the bonds are fixed and guaranteed.
A drawback from selling a combination of both stocks and bonds is the high transaction costs and the missing out on the growth of Apple shares that I would sell (Greenwood, 2004).
B. Choice and financial reasoning
Response
Choosing t…

Free corporate finance decisions Essay Sample, Download Now

Don’t waste time!

Order Original Essay on the Similar Topic

Get an original paper on the same topic

from $10 per-page