Question

You short-sell 50 shares of XYZ stock at $100 per share. Your broker's initial margin requirement...

You short-sell 50 shares of XYZ stock at $100 per share. Your broker's initial margin requirement is 50% of the value of your short position. You put up cash to satisfy the initial margin requirement.

a) What will be your rate of return (after 1 year) if XYZ stock sells at $110 a share? Assume that you do not earn any interest on your funds in the margin account and that the stock pays a dividend of $1.50 a share at the end of the year.

b) If the maintenance margin is 40%, how high can the stock price rise before you receive a margin call from your broker? Ignore the dividend (for part b) only).

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Donald opened an account to short-sell 2,700 shares of XYZ at $75 per share. The initial...
Donald opened an account to short-sell 2,700 shares of XYZ at $75 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of XYZ has risen from $75 to $85, and the stock has paid a dividend of $1.50 per share. a. What is the remaining margin in the account? (Round your answer to the nearest whole dollar.) b. If the maintenance margin requirement is 30%, will Donald receive a margin...
You sell 100 short shares of stock at $60 per share. Initial Margin Requirement (IMR%)= 50%....
You sell 100 short shares of stock at $60 per share. Initial Margin Requirement (IMR%)= 50%. Maintenance margin for short sale of stock with price > $16.75 is 30% of market (or position) value QUESTIONS: 1. What is the price for margin call?   2. What is the new market value of the position?(Note: we haven’t deposited any add’l cash yet)
You short sell 1000 shares of Internet Dreams. The initial margin requirement is 50%. A year...
You short sell 1000 shares of Internet Dreams. The initial margin requirement is 50%. A year later, the price has risen up from $40 to $50 and the stock has paid a dividend of $3.   a) What is the remaining margin on the account? b) If the maintenance margin requirement is 30%, will you receive a margin call? c) What is the rate of return on this investment?
You sold short 400 shares of a stock for $60 per share. Your broker’s initial margin...
You sold short 400 shares of a stock for $60 per share. Your broker’s initial margin requirement is 60%. The broker’s maintenance margin requirement is 35%. You initially want to put up as little capital (money) as possible to support the short sale. A.) How much capital must you have in your account before you can make the short sale? B.) If the stock price goes to $70 per share, will you receive a margin call? Show your work to...
You purchased 500 shares of stock XYZ for $80 per share. You borrowed $15,000 from your...
You purchased 500 shares of stock XYZ for $80 per share. You borrowed $15,000 from your broker to help pay for the purchase. A.) How much initial percent margin do you have in your account? B.) If your broker does not charge any interest payments on margin loans, how low can the price of the stock XYZ fall before you receive a margin call? Your broker has a maintenance margin requirement of 40% for stock XYZ. Please show your work!...
You purchased 100 shares of common stock on margin at $45 per share. Assume the initial...
You purchased 100 shares of common stock on margin at $45 per share. Assume the initial margin is 50% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $30? Ignore interest on margin. A.0.33 B.0.55 C.0.43 D.0.23 E.0.253. Assume you purchased 200 shares of GE common stock on margin at $70 per share from your broker. If the initial margin is 55%, how much did you...
Suppose that you sell short 500 shares of Intel, which is currently selling for $20 per...
Suppose that you sell short 500 shares of Intel, which is currently selling for $20 per share. Your broker requires 40% initial margin in short sales, which you covered using the T-bills in your account. Assume zero interest rate charged by the broker and that the maintenance margin is 20% A. How high can Intel's price rise before you get a margin call? B. How much money would you have to put into your account in order to satisfy the...
Suppose that you sell short 1000 shares of IBM , currently selling for $50 per share,...
Suppose that you sell short 1000 shares of IBM , currently selling for $50 per share, and give your broker $30,000 to establish your margin account. The maintenance margin is 35%. a) if the price of IBM immediatley changes to $55, do you receive a margin call? Explain b) If the maintenance margin is 35%, how high can IBM's price rise before you get a margin call? Please show work
You purchased 100 shares of common stock on margin at $40 per share. Assume the initial...
You purchased 100 shares of common stock on margin at $40 per share. Assume the initial margin is 50% and the stock pays no dividend. What would the maintenance margin be of a margin call is made at a stock price of $25? Ignore interest on margin. Make sure that you interpret your numerical answer (i.e. explain why would you get the call at this rate).
You just bought 200 shares of a stock priced at $48 per share using 50% initial...
You just bought 200 shares of a stock priced at $48 per share using 50% initial margin. The broker charges 4% annual interest rate on the margin loan and requires a 30% maintenance margin.  One year later stock price dropped to 31 and you recieved margin call, to restore your margin to the initial margin level, how much would you need to deposit? Answer ___+/- ____ You sell short 100 shares of company A which are currently selling at $32 per...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT