Question

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $49 per share a. How much in ca

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Part a:
Initial margin =50% of the total equity value
=50%*(100*49)=2450
Total value of the account=Stock value+Initial margin
=100*49+2450=7350

Answer: Initial margin=$7350

Part b:
Maintenance margin=[(Total value of the account)-(Stock value)]/(Stock value)
Suppose the margin call price be P, then we will have;

30%=[(7350)-(100*P)]/(100*P)
30%*(100*P)=(7350)-(100*P)
30%*(100*P)+(100*P)=(7350)
(30*P)+(100*P)=7350
130*P=7350
P=7350/130=56.53846 or $56.54 (Rounded to two decimal places)

Answer: Stock price reaches $56.54

Add a comment
Know the answer?
Add Answer to:
You are bearish on Telecom and decide to sell short 100 shares at the current market...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • You are bearish on Telecom and decide to sell short 100 shares at the current market...

    You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? X Answer is complete but not entirely correct. Initial margin $ 5,000 b. How high can the price of the stock go before you get a margin call if the...

  • Help Save & You are bearish on Telecom and decide to sell short 100 shares at...

    Help Save & You are bearish on Telecom and decide to sell short 100 shares at the current market price of $33 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value...

  • You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How muc...

    You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • You are bearish on Telecom and decide to sell short 280 shares at the current market...

    You are bearish on Telecom and decide to sell short 280 shares at the current market price of $100 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? (Round your answer to the nearest whole number) or to be put into b. How high can the price of the stock go before you get a margin call if...

  • 1. You are bearish on Telecom stock and decide to sell short 100 shares at the...

    1. You are bearish on Telecom stock and decide to sell short 100 shares at the current market price of $50 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • You are bearish on Telecom and decide to sell short 100 shares at the current market...

    You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Enter your answer without a dollar sign Your Answer: Answer Question 5 (1 point) continued from the previous question) How high can the price of the stock go before you get...

  • Question 4 (1 point) You are bearish on Telecom and decide to sell short 100 shares...

    Question 4 (1 point) You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Enter your answer without a dollar sign Your Answer: Answer Question 5 (1 point) continued from the previous question) How high can the price of the stock...

  • Question 4 (1 point) Saved You are bearish on Telecom and decide to sell short 100...

    Question 4 (1 point) Saved You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Enter your answer without a dollar sign Your Answer: 2500 Answer Question 5 (1 point) (continued from the previous question) How high can the price of...

  • You are bearish on a technology stock and decide to sell short 100 shares at the...

    You are bearish on a technology stock and decide to sell short 100 shares at the current market price of $36.00 per share. a.) How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position b.) How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...

  • You are bullish on Telecom stock. The current market price is $50 per share, and you...

    You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. Round your answer to two decimal places and enter the number without the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT