corporate finance decisions

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 the combination of the bonds and stocks at 60% and the bonds at 50%
I would choose to dispose of a portion of each and more of the bonds since the yields are low and the Apple shares are growth stocks.

60% of 100,000 = $60,000 out of bonds and 50% of $80,000 = $40,000 out of selling stocks.
C. Job Option
Response
The case study does not involve any job.
Question 2: Bonus versus Stocks
A. Mathematically best choice
Why?
In terms of mathematics, there is no difference in the options provided as they both yield $5,000.
B. Advantages and disadvantages of each option
Taking the bonus is advantageous in that the cash received will be instant and there will be no strings attached. However, the demerit of a bonus is that it raises the price of the stocks for another option leading to losses financially (Tolikas, 2015).
A benefit of assuming the stocks is that if the future prices rise, the holder will have capital gains. However, the stocks are disadvantageous because they involve a lot of risks and they may decline in value.
C. Choice and financial reasons
To avoid the stock risks, I would take the $5,000 bonus. Additionally, money loses value, and the amount received today will not be as valuable when received tomorrow (Gpyenko, 2009).
Question 3: Compliance
A. How the laws would affect a shareholder and an employee
The provisions of the Securities Act of 1933 require that all companies should be registered for them to provide all the financial data on the securities being offered in the markets. The Act holds the firms to particular rules which are necessary regulations in protection against fraud (Giuseppe, 2017). The shareholders are assured of the safety of their investment as such I would remain calm. However, as an employee, and an agent of the shareholders, they would not be as appealing as the shareholders might think I am incompetent.
B. Laws to be familiar with
Enhancing corporate responsibility reporting has been reinforced by the Sarbanes Oxley Act of 2002 in matters regarding finances. Additionally, I would also be aware of Dodd-Frank Wall Street Reform, the Consumer Protection Act of 2010, and the Investment Advisors Act of 1940 which were all put together to control the finance managers and prevent fraud.
References
Greenwood, A. (2004). Current Bond Market Issues and the Development of the Electronic Asian Bond Market. Journal of international business and law, 3(1): 173-195
Giuseppe, D., Oscar G., Joost, J., and Enrico C. P. (2017). The Emergence of the Corporate Form. The Journal of Law, Economics, and Organization, 33(2): 193–236, https://doi.org/10.1093/jleo/ewx002Tolikas, K. (2015). The lead-lag relation between the stock and the bond markets. The European journal of finance, 24(10): 849-866
Goyenko, R. Y. (2009). Stock and bond market liquidity: a long run empirical analysis. Cornell university school of hotel administration. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.908.4676&rep=rep1&type=pdf