the school you would like to attend costs 100,000, to help finance your education you need to choose whether or not to sell your 1000 shares of Apple stock , 1000EE Savings Bonds (with denominations and 4.25% coupon rate) that are five years from their 30-year maturity date of a combination of both. What are the appropriate data and calculations,
help please completed three times and received three different answers.
To determine whether to sell your Apple stock, your EE Savings Bonds, or a combination of both, you should consider the financial implications of each option. Here are the calculations you need to make an informed decision:
1. Value of Apple Stock:
Find the current market price of one share of Apple stock. Let's say it's $150 per share. Now, calculate the total value of your 1000 shares by multiplying the current market price by the number of shares: 1000 shares x $150 = $150,000.
2. Value of EE Savings Bonds:
To calculate the value of your EE Savings Bonds, we need to find their present value based on their coupon rate and remaining time to maturity.
First, determine the interest rate appropriate for the remaining five years. You can consult the U.S. Department of the Treasury's website for the most recent rates or check your bond documentation. Let's assume it is 2.5%.
Next, calculate the future value of the EE Bonds. The formula for future value of a bond is: Future Value = Face Value + (Coupon Rate x Face Value x Remaining Years). Assuming each bond has a face value of $1000, the future value is: $1000 + (0.0425 x $1000 x 25) = $1000 + $1062.5 = $2062.5.
Now, calculate the present value of the EE Bonds. The formula for present value of a bond is: Present Value = Future Value / (1 + Interest Rate)^Remaining Years. Assuming an interest rate of 2.5%, the present value is: $2062.5 / (1 + 0.025)^5 = $2062.5 / (1.025)^5 ≈ $1802.15.
Finally, calculate the total value of your EE Savings Bonds by multiplying the present value by the number of bonds: $1802.15 x 1000 = $1,802,150.
3. Combination of Apple Stock and EE Savings Bonds:
Now, let's calculate the total value if you decide to sell a combination of both assets. Add the value of your Apple stock and the value of your EE Savings Bonds: $150,000 + $1,802,150 = $1,952,150.
Now that you have the values for each option, you can compare them to determine the best course of action for financing your education. Keep in mind other factors such as diversification, future potential growth, and tax implications when making your decision.