Question

Identifying and Analyzing Financial Statement Effects of Cash Dividends

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?
$Answer

b. What will be the total dividend for the year ended December 31, 2018, assuming that the number of shares remains unchanged?
Enter answer in millions. Round answer to the nearest million.
$Answer

million

Answer 1

Answer:   Bank of America

a) It is given that the shares are issued at Face Value.

Face Value of Each Share = Proceeds from the issue of 5.875% FF share / No. of Shares issued

= $ 2,350,000,000 / 94,000 shares

   = $ 25,000

b) Preference share dividend = Preference share capital(Face value * No. of Preference shares) * Rate of preference dividend

= Preference dividend for 6 months(15Mar,2018 - 15Sep,2018) + Preference dividend for 3.5months(16-Sep,2018 - 31Dec,2018)

  = $ 2,350,000,000 * 5.875% * 6 months + $ 2,350,000,000 * 5.875% * 3.5 months

= $ 69,031,250 + $ 40,268,229

= $ 109,299,479