Question

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $95 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $95 to $101.00, and the stock has paid a dividend of $15.00 per share.

a. What is the remaining margin in the account?

Remaining margin            $

b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)

Short margin             %

b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?

	Yes
	No

c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Rate of return             %

Answer 1