An issue of 8.5% Series C preferred stock has a par value of $75 million or $40 per share and was sold to investors several years ago at par. According to the terms of the issue, the preferred is scheduled to be redeemed in 25 years at its par value of $40 per share. Dividends are paid quarterly but analyzed as if paid annually. The stock is currently trading at a discount for $35 per share.

4. Using the convexity formula given on the last page of the exam, [but on an annual basis rather than semi-annual because m = 1], the Convexity of the Preferred Stock is:

1. 81.2
2. 148.1
3. 162.7
4. 1162.3
5. 178.7