Suppose your employer offers you a choice between a $5,300 bonus and 300 shares of the company
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Question:
Suppose your employer offers you a choice between a $5,300 bonus and 300 shares of the company stock. Whichever one you choose will be awarded today. The stock is currently trading for $58 per share. Ignore transaction costs.
a. Suppose that if you receive the stockbonus, you are free to trade it. Which form of the bonus should youchoose? What is itsvalue?
b. Suppose that if you receive the stockbonus, you are required to hold it for at least one year. What can you say about the value of the stock bonusnow? What will your decision dependon?
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