You purchase 1,000 shares of stock X at a price of $85.93. In addition, you believe that stock Y is overvalued, thus you decide to short 1,000 shares at a price of $94.76. Your account has an IMR of 50% and an MM of 25%, and your broker will charge you 4.540% APR monthly compounding as interest on any borrowed funds. Assume that you utilize your margin to capacity, you do not earn any interest on cash deposited and all your accounts are aggregated.

Suppose that 7 months from now stock X is trading at $82.86. At what price would stock Y have to trade in order for you to receive a margin call? (round your answer to 4 decimals).

Answer rating: 100% (QA)

Step 12 Your total investment in stock X is 85 9301000 x 8593 Your total investment in stock Y is 94 ... View the full answer