You believe the stock in Freeze Frame Co. is going to fall, so you short 1,600 shares

Question:

You believe the stock in Freeze Frame Co. is going to fall, so you short 1,600 shares at a price of $72. The initial margin is 50 percent. Construct the equity balance sheet for the original trade. Now construct an equity balance sheet for a stock price of $63 and a stock price of $79. What is your margin at each of these stock prices? What is your effective annual return if you cover your short position at each of these prices in five months?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...