On March 15, 2018, Bank of America issued 94,000 shares of 5.875% Fixed-to-Floating Rate Non-Cumulative Preferred...

On March 15, 2018, Bank of America issued 94,000 shares of 5.875% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series FF for $2.35 billion. Dividends are payable semiannually on or about March 15 and September 15.

a. Assume the stock was issued at face value. What is the face value of each Series FF share?

b. What will be the total dividend for the year ended December 31, 2018, assuming that the number of shares remains unchanged?

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Expert Solution

ANSWER:

Given that those preffered share are issued at face value. so there will be no premium discount component in total issue proceeds of $2,350,000,000

total number of shares issued =94,000

face value of each series FF share = $2,350,000,000/94,000

=$25,000

so the face value of each series FF share is $25,000

Answer to Requirement b:

As per information given,dividends are paid March 15 and Sep 15, shares are issued on March 15. so, dividends to be paid for only from march 15 to Dec 31.this is subdivided as follows

dividend paid from March 15 to sep 15 of 2018

$25000*94000*5.875%*6months/12months =$69,031,250

dividend accrued from sep 15 to dec 31 of 2018 $25000*94000*5.875%*107days/365days

=$ 40,731,116

Total amount of dividends for the year 2018 =$$69,031,250+$ 40,731,116

=$109,504,366

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