Question

The current market price for ABC is $77 per share. Initial margin is 50%, maintenance margin is 35% and there is no margin interest. ABC pays annual cash dividends of $3.95 per share. You believe the stock price will decrease over the next year and wish to sell short using margin. Suppose you are correct and the stock falls to $62 per share at the end of the year. What is your percentage return on assets for this trade? Enter your answer rounded to two decimal places.

The current market price for ABC is $77 per share. Initial margin is 50%, maintenance margin is 35% and there is no margin interest. ABC pays annual cash dividends of $3.95 per share. You believe the stock price will decrease over the next year and wish to sell short using margin. At what price would you receive a margin call

Answer 1

Postionto Short at the Peirce of 77 Market Price is 62. berosit on Short Position (77-62) Peipt on sale = 15 (-) loss of Dividend 2 3095 Returmonshere 11.05 Redumon share is retum Xlno - gmitical recorgon 2 11.05 xoo 38.50 2 28.10t. at what price the call will receive Minimum Maintenance balance IBE 77 x 3 5 4 3 26.95 Less guitheel reagen 2) 38.50 Bearable Loss 11.10 Call hate will be a 77 - 11.10 a) 652901 at 65.90 brice Buyer will receive call.