Jennifer believes that Northern Wine stock is going to decline in value so she is short...
Jennifer believes that Northern Wine stock is going to decline in value so she is short selling 1,000 shares at $32 a share. Her initial margin requirement is 70 percent and the maintenance margin is 30 percent. What is the highest the stock price can go before she receives a margin call?
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$38.97
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$40.15
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$41.85
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$43.75
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$45.77
Homework Answers
Share price:
= [(Initial margin+Short sale proceeds)/Number of shares]/(1+Maintenance margin)
= [(1,000×$32×70%+1,000×$32)/1,000]/(1+30%)
= $41.85
Hence, correct option is “$41.85”
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