Hicks_FIN320_Milestone3

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Southern New Hampshire University *

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320

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Finance

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Feb 20, 2024

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FIN320 – Milestone 3 TERM 20EW2 ELIZABETH HICKS 2020
Looking at the possibility of how to finance an education that costs $100,000, I have a few options. I own 500 shares of Apple Stock and I also have 100 Apple Bonds to consider selling off. My 500 shares of Apple Stock are currently worth $123.24. At 500 shares, that is worth $61,620. My 10-year Apple Bonds, which are 5 years to maturity, have a yield of 3.9%. (Kenny, 2020) The present value of each bond is $814.56 (=PV(0.039,10,16.25,1000)). Some advantages of stocks are that they can have a higher return typically and many pay dividends which can be extra income for people whereas bonds are less volatile and can provide income stability. Some disadvantages of stocks are that they are volatile with no guaranteed return whereas bonds typically have lower returns that stocks and bond prices fall as interest rates go up which can be problematic for long-term bonds. 10 year bonds aren’t extremely long term so I would feel comfortable that the interest rates wouldn’t affect the bond price greatly. Personally, I am not a risk-taking person, in general. I prefer stability and predictability. While there is no way to predict all things and there is inherent risk in all that we do, I would likely finance ½ of my education with bonds, so sell 62 bonds for a total of $50,507.72 and 401 shares of Apple Stock for a total of $49,419.24. I would still keep a stake in my Apple Stock and still retain a fair number of my bonds. I understand that the returns would be smaller, but that is where I would feel most comfortable. If I chose to accept this job, the average starting salary for a Financial Analyst is $55,175. ("Financial Analyst Salary | PayScale", 2020) Starting out, it may not be as necessary to have supplemental income from stocks but it would be important to ensure minimal losses as well. If I had the opportunity to receive a cash bonus of $5000 or a comparable stock offering of 100 shares currently worth $50 each, the deciding factor, mathematically would be what the return rate has been on the stocks in the last few years and what investment options are available
to me. Getting a $5000 bonus up front affords me opportunities to choose the investments of my choosing. I can split the money and put it into what makes me comfortable. With the stock offering, there is no guarantee that the stock prices will remain the same or increase and the volatility of the stock market, this is the option that seems least appealing to me. If I chose the $5000, I could buy bonds or simply invest in another company’s stock. The choices are varied and would allow me to pick one with the risk I am most comfortable with. As a potential employee and shareholder in the company, not being properly registered under the Securities Act of 1933 is alarming. The law was enacted after the market crash of 1929 with the specific intent of protecting investors. It was designed to increase transparency of financial statements and to protect against fraud in the securities market. (Kenton, 2020) Registration with the SEC ensures compliance by providing all relevant information about the firm to potential investors. Failure to comply with this regulation would be a red flag to me. If there is nothing to hide, then there is no reason not to follow the rules. I find that only when people are hiding things do they tend to engage in subversive behaviors. If I were to eventually become the financial manager of this organization, or any organization for that matter, it would mean that I have to be up on all current regulations and laws required to stay in compliance. I would be required to be aware of all federal laws, such as the Securities Act of 1933, Securities Exchange Act of 1934, Sarbanes-Oxley Act, Federal Managers Financial Act of 1982 and the litany of reporting requirements. The Financial Manager really can make or break an organization. If that person is engaged in nefarious behaviors and does not provide the proper reporting needed to stay compliant then the entire company suffers. And now, since Sarbanes-Oxley, senior administration can be held liable and should be keeping a closer watch on how the financials are being managed. The financial manager must also be a
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keen investor. Being able to identify when investments are right or wrong and being able to communicate that to their superiors is a critical job in any firm.
References Financial Analyst Salary | PayScale. (2020). Retrieved from https://www.payscale.com/research/US/Job=Financial_Analyst/Salary Kenny, T. (2020). Apple's Bonds: The Right Investment for You?. Retrieved from https://www.thebalance.com/apple-stock-vs-apple-bonds-which-is-the-better-buy-417113 Kenton, W. (2020). Securities Act of 1933. Retrieved from https://www.investopedia.com/terms/s/securitiesact1933.asp