Question

Consider a stock with an expected return of 6%. suppose that: (a) the initial margin requirement...

Consider a stock with an expected return of 6%. suppose that: (a) the initial margin requirement on short positions is 75% and (b) the short sale proceeds and the initial margin requirement earn no interest. Find the expected return on a portfolio that solely consists of a short position of the aforementioned stock.

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Answer #1

Given,

Expected return = 6%

Initial margin = 75% or 75 cent per dollar

Solution :-

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