On January 3, 2014, you short sold 5,000 shares of Ebay, a pioneer in internet person-to-person trading, at the price of $114.11 per share. The initial percentage margin is 65% and the maintenance margin is 30%. Short sale proceeds yield 2% and the initial margin yields 3% (both rates are annual rates).

(a) Determine your short sale proceeds and the initial margin requirement.
(b) To what price must Ebay climb for you to receive a margin call on January 3, 2014?
(c) A month later, Ebay fell to $77.22. What was the actual margin in your account?
(d) Suppose that you closed your account on February 3, 2014. What was the return on your investment?

Answer rating: 100% (QA)

a The short sale proceeds is price of share number of shares 114115000 570550 Ini... View the full answer