Question

SC ous efforts to identify inefficiencies in the market QUESTION 5 An investor shorts 2500 shares of Testla Motors at $200 per share. If the investor has a margin requirement of 25%, as Testla increases in value, at what price per share can the investor expect to receive a margin call? A. $800.00 B. $250.00 C. $266.67 D. $160.00 QUESTION 6 while behavioral finance assumes that investors are The Efficient Market Hypothesis assumes that investors are . Proctorioit A. irrational, rational B. greedy, fearful

Answer 1

Tesla Motor share price = $200

No of shares = 2500 shares

Total Value = 2500*$200 = $ 500000

Investor short the shares of Tesla which means the margin call will be required if share price rises above $200 incurring loss for the investor.

Margin Requirement = 25%

lets assume Margin Call price be X

Margin % = Equity in Value/value of Stock

0.25 = (2500X - 500000)/2500X

625X = 2500X - 500000

X = $ 266.66

So, margin Call price will be $ 266.66. hence, Option C