Question

You just sold 1,200 shares of stock short at a price per share of $13.50. The initial margin requirement is 60 percent and the maintenance margin is 30 percent. What is your initial equity position?

1. $6,480

2. $7,520

3. $9,720

4. $10,520

5. $16,200

Answer 1

Proceeds from Sale = Number of shares sold * Price per share
Proceeds from Sale = 1,200 * $13.50
Proceeds from Sale = $16,200

Initial Margin Deposit = Proceed from Sale * Initial Margin Requirement
Initial Margin Deposit = $16,200 * 60%
Initial Margin Deposit = $9,720

Short Position = Number of shares sold * Short Price per share
Short Position = 1,200 * $13.50
Short Position = $16,200

Initial Equity Position = Proceeds from Sale + Initial Margin Deposit - Short Position
Initial Equity Position = $16,200 + $9,720 - $16,200
Initial Equity Position = $9,720