Question

You sold short 1,000 shares of stock for $21,000. The initial margin requirement is 60%. Current...

You sold short 1,000 shares of stock for $21,000. The initial margin requirement is 60%. Current stock price is $27 per share. What is your current margin%?

1- 24.4%

2- 30%

3- 19.6%

4- 52.4%

Homework Answers

Answer #1

No. of Shares Sold = 1000

Total Value of Shares Sold = $ 21000

Value of Each Share = $ 21000 / 1000 = $ 21

Now, Initial Margin % = 60 %

Therefore Initial Margin Money Deposited = 60 % x $ 21000 = $ 12600

Now, the new share price is $ 27

Total value of shares today = $ 27 x 1000 Shares = $ 27000

Now, we had sold shares @ $ 21, Now value of shares have increased to $ 27. Therfore our margin deposited earlier is decreased by $ 6 ($ 27 -  $ 21 ) Per share sold

Total loss of Margin Money =  $ 6 x 1000 Shares =$ 6000

Now Current Margin % = (Inital Margin deposited - Fall in the value of Margin) / Total Value of Shares today

Current Margin % =( $ 12600 - $ 6000 )/ $ 27000

Current Margin % = 24.44 %

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