Suppose your employer offers you a choice between a $5000 bonus and 100 shares of the company stock. 1 answer below »

Suppose your employer offers you a choice 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 should you choose? What is its value?

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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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