The Wolverine Corporation has a convertible preferred stock outstanding. The par value of this preferred stock is

Question:

The Wolverine has a convertible preferred stock outstanding. The of this preferred stock is $100, and it pays a $10 dividend. The preferred stock is callable at 103 percent of It has 10 years remaining until and is convertible into 2.5 shares of . The current price is $42. Similar (quality and nonconvertible preferred stock sells at a price to yield 9 percent.
a. What is the conversion value of this preferred stock?
b. What is the straight (nonconvertible) preferred stock value of this security?
c. If interest rates decline such that similar (quality and nonconvertible preferred stock sells at a price to yield 7 percent and the price of Wolverine’s increases to $44, for how much will this convertible security sell?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...