I looked at cash flows and probability of call if the company can now issue new prefs with a (market) reset spread around 2.8% (as they just did).

For a simplistic illustration, the closest pref in price is PR.C which also trades around par.

PR.G 4.95% +2.77% resets Nov 15, 2023

PR.C 4.45% + 3.43% resets Nov 15, 2022

There is about an 80% chance PR.C will be called in 4.5 years vs about 50% PR.G will be called (assuming, but not that sensitive to, a market reset spread volatility of 0.10; independent of GOC-5). Although PR.C has a higher reset spread, the investor is unlikely to see it and must suffer 0.5% lower annual dividends in the meantime.

When the probability of call is more than 50% the “Expected Future Current Yield” has less and less relevance (none in the case of super premium prefs PR.X and PR.A with +490 and +466 reset spreads and 99% chance of call).

Using the probability of call with cash flow approach, NA.PR.W (3.90% + 225; resetting Feb 15, 2020) is the most overvalued by about 65 cents.

Sometimes the cash flow with probability approach gives similar results to implied volatility and sometimes the results are different. For NA.PR.G they are different and $25.08 is my estimated “fair value” compared with other NA issues.

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