Securities Short Answer Using the publicly trading price of

Securities Short Answer: Using the publicly trading price of the following securities, examine their value and returns. Determine which you would prefer to own. T-bill Bond (pick any) Stock (pick any) Answer the following questions: 1. Why did you select this security? 2. Is it a short-term or long-term security and how do you know this? 3. What are the advantages and disadvantages of your selection?

Solution

T-Bill: 90 days T-bill rate is 1.43% (as on Jan,8 2018)

Bond: iShares floating rate bond ETF price is $50.86 and YTD is .08%

Stock: Apple Inc. share price is $174.33 (current price), return = more than 20% in 2017.

I will prefer to own Apple Inc. stock. Equities give better return than t-bills and bonds. Apple Inc. stock has given handsome return in one year.

Answer(1)- I selected these securities because these are famous securities and represent their segment.

Answer(2)- T-bills is short term for 3 months only while Bond etf has maturity of 1 month and 5 years. Apple share showed this return in more than one year that is considered long term capital gain.

Answer(3)- Advantage- Stocks give higher return than any other financial product or security. Stocks provide dividend as well as capital appreciation.

Disadvantage- Stocks are riskier investment. They do not provide risk free return like t-bills. When market comes down, stocks also come down drastically.