Suppose your employer offers you a choice between a $5000 bonus and 100ares of the company’s stock. Whichever one you choose will be awarded today. The stock is currently trading at $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?
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?
You are an international shrimp trader located in New Orleans. A food producer in the Czech Republic offers to pay you 2 million Czech koruna (CZK) today in exchange for a year’s supply of frozen shrimp. Your Thai supplier will provide you with the same supply for 3 million Thai baht (THB) today. If the current competitive market exchange rates are 25.50 CZK per U.S. dollar (USD) and 41.25 THB per USD, what is the value of this deal?
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