Question: EXERCISE #3: The margin requirements are : Initial 50/Maintenance 40. ABC shares trade at $70. You short sell 300 shares for $70 per share in
EXERCISE #3: The margin requirements are : Initial 50/Maintenance 40. ABC shares trade at $70. You short sell 300 shares for $70 per share in your margin account. The total value of shares is $ ............................................................... The margin amount is $.................................. The total in the acct is $ ..................................................... A. Stock goes up to $80 i.e. 14.3%. The total value of shares is $ ............... You buy the shares back, return them to the broker, and you have $............................................ left in the account. Your percentage profit is: (Final amt Posted Margin) / Posted Margin = ..........................................% B. Ignore A. Stock goes down to $60 i.e. 14.3%. The total value of shares is $...... You buy the shares back, return them to the broker and you have $............................................ left in the account. Your percentage profit is: (Final amt Posted Margin) / Posted Margin = ........................................... % C. At what stock price (up) will you get the margin call (i.e. to post more money in the account)? 0.40 = (.............. ............) / 300P Solve for P = $ ....
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