Question

You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. Round your answer to two decimal places and enter the number without the dollar sign. Your Answer: Answer Question 4 (1 point) You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Enter your answer without a dollar sign Your Answer: Answer

Answer 1

Question 1:

No of shares = Total Investment / Share price = 10,000 / $50 = 200 shares

Stock price for the margin money :

Margin money = Equity Value / Value of shares

30% = [200* Price of the stock] -5000/ [200 * Price of the Stock]

Price of the stock = $5000/ 140 = $35.71

Question 4:

Value of the stock = 100 * $50 = $5000

Amount to be put in brokerage account = $5000 * 50% = $2500