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    Your company offers stock dividend

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    Suppose your employer offers you a chose between a 5000 bonus and 100 shares of the company stock. Whichever one you choose will be awarded today. The stock is currently trading for $63.per share.

    a) Suppose that if you receive the stock bonus, you are free to trade it. Which form of the bonus would you chose? What is its value?

    b) Suppose that if you receive the stock bonus, you are required to hold it for at least one year. What can you say about the value of the stock bonus now? What will your decision depend on?

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    Solution Preview

    a. I would choose the stock bonus, because I can sell the stocks at 63*100=$6300, which is 1300 more than the 5000 bonus.

    b. The value of the stock now is 0, because you can not trade it ...

    Solution Summary

    The expert examines a stock bonus and whether to sell it, trade it, or keep it. The value is determined.