You bought $1000 worth of common stocks in your trading account on margin using $600 of...
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You bought $1000 worth of common stocks in your trading account on margin using $600 of your own cash and $400 borrowed from your broker. Your broker waives interest charges but stipulates a maintenance margin requirement of 20%. What market value of your common stocks would be at the boundary of just triggering a margin call? In other words, if the market value of your common stocks falls below this threshold value, then you would get a margin call from your broker. A short seller borrowed a share of common stock from her broker and sold it at $200. Then stock paid a $2 dividend. Finally, the short seller closed out her short position by buying back a share of the same common stock at $180 and returning it to her broker. What is the short seller's profit in this short sale transaction, assuming zero interest rate? You bought $1000 worth of common stocks in your trading account on margin using $600 of your own cash and $400 borrowed from your broker. Your broker waives interest charges but stipulates a maintenance margin requirement of 20%. What market value of your common stocks would be at the boundary of just triggering a margin call? In other words, if the market value of your common stocks falls below this threshold value, then you would get a margin call from your broker. A short seller borrowed a share of common stock from her broker and sold it at $200. Then stock paid a $2 dividend. Finally, the short seller closed out her short position by buying back a share of the same common stock at $180 and returning it to her broker. What is the short seller's profit in this short sale transaction, assuming zero interest rate?
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The market value of the common stocks at the boundary of just triggering a margin call can be calcul... View the full answer
Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
Posted Date:
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