Consider three preferred stocks, call them A, B and C, issued by the same corporation.

Each preferred stock is expected to pay

$1.5 dividends per share quarterly into indefinite

future. Preferred stock A is non-callable and non-convertible, B is non-callable and

convertible and C is callable and convertible. The required expected annual rates of return on

A, B and C, are respectively as 7%, 6% and 6.5%. Find the value of the call to the issuer and

the value of conversion to the investor.

Consider now a fourth preferred stock issued by the same corporation which will also be

expected to pay $1.5 dividends per share quarterly into indefinite future. This fourth

preferred stock, call it D, is non-callable, convertible and also puttable. Suppose the value of

the put per share is $8.0. Find the required expected annual rate of return on this preferred stock.