Question

Suppose you sell short Apple.Inc which is currently trading at $100 per share. You put $20,000...

Suppose you sell short Apple.Inc which is currently trading at $100 per share. You put $20,000 as cash into your brokerage account with an initial margin of 50%. The maintenance margin is 25%.

a. How many shares of Apple can you sell short? (8 pts)

b. How far can the stock price increase before you get a margin call? (12 pts)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

N * 100 = 20,000/0.50

a. Number of Apples shares we can short, N = Cash/(Share price * Initial margin)

N = 20,000/(100 * 0.50)

N = 400

Number of Apples shares we can short is 400

b.

The stock price can increase to as high as $140 before we get a margin call.

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
You are bearish on Telecom and decide to sell short 100 shares at the current market...
You are bearish on Telecom and decide to sell short 100 shares at the current market price of $41 per share. a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?
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
16) You are bearish on Telecom and decide to sell short 100 shares at the current...
16) You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?...
You are bearish on Telecom and decide to sell short 100 shares at the current market...
You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round...
Please include work Suppose that you sell short 500 shares of Intel, which is currently selling...
Please include work 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 that the maintenance margin is 20%. How high can Intel's price rise before you get a margin call? How much money would you have to put into your account in order to satisfy the maintenance margin requirement if the price...
Please show work Suppose that you sell short 500 shares of Intel, which is currently selling...
Please show work 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 that the maintenance margin is 20%. How high can Intel's price rise before you get a margin call? How much money would you have to put into your account in order to satisfy the maintenance margin requirement if the price...
You are bearish on Telecom and decide to sell short 240 shares at the current market...
You are bearish on Telecom and decide to sell short 240 shares at the current market price of $85 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? (Round your answer to the nearest whole dollar.) Cash or securities to be put into brokerage account : ______________ b. How high can the price of the stock go before...
You are bearish on Telecom stock and decide to sell short 400 shares at the current...
You are bearish on Telecom stock and decide to sell short 400 shares at the current market price of $30 per share. How much cash must you put into your brokerage account if the broker’s initial margin requirement is 30% of the value of the short position? How high can the price of the stock go before you get a margin call if the maintenance margin is 35% of the value of the short position?
12A) You short-sell 100 shares of Tuckerton Trading Co., now selling for $44 per share. What...
12A) You short-sell 100 shares of Tuckerton Trading Co., now selling for $44 per share. What is your maximum possible gain, ignoring transactions cost? Multiple Choice $44 $56 unlimited $4,400 12B)You’ve borrowed $30,222 on margin to buy shares in Ixnay, which is now selling at $43.8 per share. You invest 1,380 shares. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price changes to $54 per share. a. Will...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT