Question: Please provide an excel file that can answer questions similiar to this one by chaning the data and inputing new data 1.You sell short 100
Please provide an excel file that can answer questions similiar to this one by chaning the data and inputing new data
1.You sell short 100 shares of the GTY stock at $80 per share. Assume your broker requires an initial margin of 40% and a maintenance margin of 25%.
1)If the stock price drops to $70, what is the percentage margin?
Initial total stock value: $80(100)=$8,000
If the stock price drops to $70,
Total stock value: $70(100)=$7,000
Required margin deposit when the short position was entered into: $8,000(.40)=$3,200.
Percentage margin =
2)If the stock price increases above a certain level, P, the percentage margin would drop below the maintenance margin of 25% and you will get a margin call. What is P?
Percentage margin =
3)If the stock price increases to $95, how much money do you have to add to your account to restore the maintenance margin of 25%?
Let this amount to be X.
Percentage margin =
X=675
The TSM Corporations stocks are currently selling at $45 per share. You believe that the stock is overvalued and decide to take a short position on the stock. You short 100 shares for a total of $4,500. Your broker borrow this number of shares from his clients, sell them, and deposit $4,500 in your account. You cannot withdraw it. In addition, you must post a margin as collateral. Assume your broker requires an initial margin of 60% and a maintenance margin of 40%.
Percentage margin:
The equity value in account is equal to cash received from the short sale, plus the required margin deposit, minus the value of the stock owed. The initial margin requirement is 60%, so the initial required margin deposit is $4,500(.60)=$2,700. Initially the value of the stock owed is also $4,500.
So initially, the percentage margin is equal to
If the stock price drops to $40,
Percentage margin =
If the stock price increases to $50,
Percentage margin =
If the price increases above a certain level, P, the percentage margin would drop below the maintenance margin of 40% and you will get a margin call. What is P?
Percentage margin =
If the stock price increases to $60, how much money do you have to add to your account to restore the maintenance margin of 40%?
Let this amount to be X.
Percentage margin =
X=1,200
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