A preferred stock that pays an annual dividend of 10, has a par ...

[BRWH]

A preferred stock that pays an annual dividend of 10, has a par value of 100, and has a required
  return of 5 will be valued at 200.
 
  Indicate whether the statement is true or false

Question 2

You want to invest in bonds. Explain whether or not each provision listed will make the bonds more or less
  desirable as an investment: call provision, convertible bond provision, subordinated debt.
 
  What will be an ideal response?

[akemokai]

Answer to Question 1

TRUE

Answer to Question 2

A call provision makes the bonds less desirable. A call provision protects the issuer in case interest rates drop. Thus,
the bonds will only be called if it is advantageous for the issuer and not so for the bondholders.
Convertible bonds are more desirable. Bonds may be converted at the option of the bondholder if the value of the stock
that may be obtained from conversion is higher than the value of the bonds. Thus, the straight bond value sets a floor
and the conversion feature may result in an increase in value above that floor.
Subordinated debt is less desirable. Unsubordinated debt gets preference in the event of bankruptcy and liquidation.