Question: 1) End-of-Chapter Problem 16 in Chapter 3 Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams. The initial margin requirement was
1) End-of-Chapter Problem 16 in Chapter 3 Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share. a. What is the remaining margin in the account? b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call? c. What is the rate of return on the short position (treating the initial margin as the amount invested)
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