HomeworkLib
Question

2) You sell short 100 shares of ABC stock at $40 per share. The initial margin is 50% and the maintenance margin is 40% How m
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Q1) Initial margin = 50%

Price per share = $40

Initial margin per share = 40 × 50%

= $20

Q2) Margin call = Price × (1+initial margin) / (1+maintenance margin)

= 40 × ( 1+0.50) / (1+0.40)

= 40 × (1.50 / 1.40)

= 40 × 1.0714

= $42.86

0 0
Add a comment
Know the answer?
Add Answer to:
2) You sell short 100 shares of ABC stock at $40 per share. The initial margin...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • IN CLASS ASSIGNMENT Suppose You short sell 500 shares of ABC stock at $25/share Initial margin...

    IN CLASS ASSIGNMENT Suppose You short sell 500 shares of ABC stock at $25/share Initial margin requirement is 50% and maintenance margin requirement is 40% A year later, stock price increases to $30/share QI. Initially, how much did you supply and how much did you borrow? Create an initial Balance sheet for short sale margin account. Q2. After a year later, what is your new margin? Did you get a margin call? Create a new B/S for this question Q3....

  • You are bearish on a technology stock and decide to sell short 100 shares at the...

    You are bearish on a technology stock and decide to sell short 100 shares at the current market price of $36.00 per share. a.) 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 b.) How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • 1. You are bearish on Telecom stock and decide to sell short 100 shares at the...

    1. You are bearish on Telecom stock and decide to sell short 100 shares at the current market price of $50 per share. a. 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? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How muc...

    You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. 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? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • Suppose you short sell 20 shares of ABC, now selling at $51 per share. The initial...

    Suppose you short sell 20 shares of ABC, now selling at $51 per share. The initial margin of your purchase is 55% and the maintenance margin is 25%. At what stock price will you receive a margin call?

  • You sold short 1,000 shares of a stock at $46 per share. The initial margin is...

    You sold short 1,000 shares of a stock at $46 per share. The initial margin is 50%. a) At what stock price would you receive a margin call if the maintenance margin is 35%? (do not consider dividends in question a) b) Assume that the stock paid a $0.25 dividend per share each quarter, what is the rate of return if you buy to cover the shares at $40 per share at the end of the quarter?

  • Help Save & You are bearish on Telecom and decide to sell short 100 shares at...

    Help Save & You are bearish on Telecom and decide to sell short 100 shares at the current market price of $33 per share. a. 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? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value...

  • You are bearish on Telecom and decide to sell short 100 shares at the current market...

    You are bearish on Telecom and decide to sell short 100 shares at the current market price of $49 per share a. 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? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • You are bearish on GE stock and decide to sell short 50 shares at the current...

    You are bearish on GE stock and decide to sell short 50 shares at the current market price of $160 per share. (a) How much cash must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? (b) How high can the stock price rise before you get a margin call if the maintenance margin is 25%?

  • Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin...

    Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin at 45%. The minimum margin requirement is 30%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction. 1. At what price would you face a margin call? 2. If the price is $110 at the end of the period, what is your margin ratio at that point?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT