Question
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
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? (Choose all the answers that apply)\ A. You might decide that it is better to take the
$5,100
in cash than to wait for the uncertain value of the stock in one year. This would be especially true if you believed you could invest the
$5,100
today in another equally risky asset that would be worth more than the stock one year from now.\ B. Since you work for this company you are considered to be a stakeholder. This implies that, for you, the company's shares are worth more than
$6,257
today. Therefore, you should take the stock bonus.\ C. Because you could buy the stock today for
$6,257
if you wanted to, the value of the stock bonus cannot be more than
$6,257
. But if you are not allowed to sell the company's stick for the next year, its value to you could be less than
$6,257
.\ D. The stock's value will depend on what you expect it to be worth in one year, as well as how you feel about the risk involved. There is no clear-cut answer to which alternative is best, because taking the stock today and having to hold it for a year involves risk.
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