You short sold 650 shares of stock at a price of $35 and an initial margin...

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Question

Answer 1

Answer #1

a. Margin call price

Proceeds from short sale = 700 shares * $35 = $24,500

Initial deposit = $24500*70%=17,150

Account value = Proceeds from short sale + Initial deposit

Account value = $24500 + $17150=41,650

Margin call price = Account value / [700 + (0.40*700)]

Margin call price = $41650 / 980

Margin call price = $42.5

b. Account Equity

Account Equity = Account value - (shares * margin call price)

Account Equity = $41650 - (700 * 42.5)

Account Equity = $11,900

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Answer 2

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