Q2C. Suppose that the prime broker changes the margin requirements at t+1 (say next month) for both long and short positions to 30 %. You can assume that nothing else changed (i.e., the returns on long, short and cash positions are all zero). By how much would the positions need to be scaled back? Reproduce the balance sheet at t+1 and compute the margin ratios for long and short positions to ensure that they are at least 30 %.

Assets	t	t+1	Equity and Liabilities	t	t+1
Long security positions	160		Equity supporting long positions
			Equity supporting short positions
			Free equity
			Total Equity (NAV)	100	100
Initial margin for shorts
Cash proceeds from short sale			Margin loan on long positions
Cash in money market account			Short security positions	200
Total Cash			Total Liabilities
Total A			Total E+L

At t+1:

MS= Cash proceeds+Cash margin/(MV(Short equity)) -1 =?

ML= 1-(Margin loan)/(MVLong bought on margin) =?