Use the data set (At the bottom) for the monthly closing price of Visa, the credit card company, from April 2008 to April 2022  

You decide to short 200 shares of Visa's stock on July 30, 2021, based on the following terms.
1): The stock borrower (you) must leave cash collateral with the lender of 102% of the market  value of the borrowed shares.
2): Under Reg T, you have to post an additional 50% in the margin account.
3): You own a stock portfolio worth $12,500 on top of this.

1. What is the total amount of extra collateral that you have to deposit with the broker? How much of it should be in cash? 

2.  Refer to the closing prices of Visa on the different dates provided. Calculate returns every month from May 2021 to April 2022. The price number is already adjusted to include dividend. To calculate returns from month t to month t + 1, you need to calculate [P (t + 1) - P (t)] / P (t); i.e., P (t+1) / P (t) - 1. For instance, from April 30, 2021, to May 28, 2021 (last trading day of May), returns = 225.46 / 231.67 - 1 = -0.0268 (or -2.68%). 

3.Following instruction in Question 2, calculate the returns for every month from May 2008 to  April 2022. What is the average return during this period? What are the average returns in the first half (from 2008 to 2015) vs. in the second half (from 2016 to 2022)? (Note: Since the price is given at the end of each month, use end of Dec 2014 to end of Dec 2015 for year 2015 returns.). The average should be an arithmetic average. 

4. Refer to the closing prices of Visa on the different dates provided. Calculate returns if you have $1,000 in cash, borrow $500 at a market interest rate of 1%, and invest $1,500 in Visa from April 30, 2021, to April 29, 2022.

 

VISA Data Set
Year	Month	Adj Close
2008	4	18.910961
2008	5	19.570406
2008	6	18.42601
2008	7	16.556442
2008	8	17.200026
2008	9	13.931946
2008	10	12.56122
2008	11	11.928051
2008	12	11.926368
2009	1	11.221473
2009	2	12.895031
2009	3	12.667334
2009	4	14.799817
2009	5	15.426353
2009	6	14.207552
2009	7	14.937786
2009	8	16.224812
2009	9	15.794877
2009	10	17.314716
2009	11	18.512295
2009	12	20.019667
2010	1	18.776743
2010	2	19.520678
2010	3	20.868176
2010	4	20.68478
2010	5	16.611092
2010	6	16.243206
2010	7	16.840141
2010	8	15.83685
2010	9	17.077417
2010	10	17.974295
2010	11	16.983133
2010	12	16.217583
2011	1	16.095459
2011	2	16.832838
2011	3	16.998369
2011	4	18.037384
2011	5	18.716217
2011	6	19.491344
2011	7	19.787441
2011	8	20.32873
2011	9	19.863791
2011	10	21.611025
2011	11	22.470745
2011	12	23.581675
2012	1	23.374954
2012	2	27.02846
2012	3	27.459478
2012	4	28.618361
2012	5	26.80789
2012	6	28.823992
2012	7	30.092316
2012	8	29.901133
2012	9	31.360123
2012	10	32.406399
2012	11	34.963692
2012	12	35.482613
2013	1	36.964386
2013	2	37.135246
2013	3	39.840858
2013	4	39.517143
2013	5	41.787865
2013	6	42.947861
2013	7	41.598927
2013	8	40.990242
2013	9	44.993034
2013	10	46.304451
2013	11	47.903103
2013	12	52.53429
2014	1	50.823875
2014	2	53.303398
2014	3	51.017117
2014	4	47.885555
2014	5	50.773678
2014	6	49.894051
2014	7	49.965092
2014	8	50.322643
2014	9	50.620197
2014	10	57.277187
2014	11	61.25338
2014	12	62.324478
2015	1	60.591679
2015	2	64.489922
2015	3	62.304424
2015	4	62.914032
2015	5	65.419182
2015	6	64.073738
2015	7	71.88855
2015	8	68.033638
2015	9	66.577675
2015	10	74.14724
2015	11	75.513969
2015	12	74.251755
2016	1	71.321892
2016	2	69.311218
2016	3	73.371727
2016	4	74.10083
2016	5	75.73175
2016	6	71.281624
2016	7	75.010521
2016	8	77.749535
2016	9	79.617371
2016	10	79.434448
2016	11	74.437935
2016	12	75.269897
2017	1	79.794571
2017	2	84.840225
2017	3	85.900635
2017	4	88.172119
2017	5	92.048141
2017	6	90.807411
2017	7	96.404198
2017	8	100.238678
2017	9	102.068268
2017	10	106.665428
2017	11	109.196747
2017	12	110.779602
2018	1	120.699455
2018	2	119.446121
2018	3	116.422791
2018	4	123.488739
2018	5	127.22612
2018	6	129.11705
2018	7	133.299118
2018	8	143.193649
2018	9	146.53302
2018	10	134.58313
2018	11	138.351639
2018	12	129.044464
2019	1	132.047089
2019	2	144.869385
2019	3	153.028885
2019	4	161.102112
2019	5	158.06488
2019	6	170.299088
2019	7	174.665741
2019	8	177.432907
2019	9	169.031464
2019	10	175.762863
2019	11	181.315033
2019	12	184.955612
2020	1	195.852142
2020	2	178.911835
2020	3	158.824936
2020	4	176.17424
2020	5	192.458908
2020	6	190.737228
2020	7	188.002106
2020	8	209.320206
2020	9	197.750107
2020	10	179.692825
2020	11	208.014877
2020	12	216.627747
2021	1	191.392654
2021	2	210.348679
2021	3	210.020569
2021	4	231.674316
2021	5	225.464874
2021	6	232.269135
2021	7	244.755753
2021	8	227.580429
2021	9	221.574188
2021	10	210.652161
2021	11	192.747177
2021	12	215.945557
2022	1	225.372192
2022	2	215.357635
2022	3	221.347244
2022	4	212.723724

Answer rating: 100% (QA)

SOLUTION Question 1 The total amount of extra collateral that you have to deposit with the broker is ... View the full answer