You are the lead analyst at QAR hedge fund. You decide to short 100 shares of MGE
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Question:
(a) At what price of MGE stock will you receive a margin call from your broker?
(b) Due to an FDA approval of a new drug, MGE shares rose to as much as$130 per share. How much additional money must you deposit to bring the current margin to your broker's maintenance margin?
(c) You decide to buy back shares at $90 to cover your short position at the end of one year. What is the ROIC for this transaction? You pay a commission of $15 on closing. While you are short, MGE paid a $0.5 per share dividend. Your broker charges a 10 percent interest rate.
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