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  3. 1. consider three preferred stocks, call them a, b

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

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1. 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

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