The Top Down Corporation has 1 million callable convertible preferred shares outstanding with a par value of $100 and a dividend rate of 5% per year, paid quarterly. The shares are callable at $105 per share and are convertible into 4 common shares.

a. What is the dividend payment on preferred shares each quarter?

b. Suppose Top Down determines that they can issue preferred stock that pays 3% per year. What are Top Down’s possible courses of action?

c. Suppose the common stock is currently trading at $30 per share and the preferred stock is trading at $150 per share. Is it attractive to convert to common stock? Explain.