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 1,000 shares of Apple stock, 1,000 EE Savings Bonds (with $100 denominations and 4.25% coupon rate) that are five years from their 30-year maturity date, or a combination of both. Provide the appropriate data and calculations that you would perform to make this decision.
Example:
Bond
In this case the bonds are 1000 dominated in $100, (1000 × 100) and matures in 5 years. The coupon will be 4.25, meaning that they pay 0.0425 × 100,000= 4,250 for each year but in year 5, you will receive 104,250 (100,000 + 4250 when the bond matures). Most bonds pay coupons and in the final year pays the principal.
Bond cashflow
Year 1 = $ 4,250
Year 2 = $4,250
Year 3 = $4,250
Year 4 = $4,250
Year 5 = $104,250 (100,000+4,250)
Total Cash = $121,250 (will be in 5 years )