Question

Q15*. (Short Sale)7*: You recently borrowed an asset and sold it at $400 (short sale). The margin requirement was 80% of the deal. The prices of the asset for the past three days after the short sale were $450, $390 and $420. Calculate how much money will be on your margin account after the third day.

Answer 1

Q15.

The status of account after each day is as shown below:

$ 400 Proceed from short sale Margin requirement (80% of deal) 320 Account balance = Initial credit + 80% of deal as margin Cumulative Profit/Loss = requirement + cumulative Price Deal price - Current price profit/loss $ 400 - 720 $ 450 $ -50 $ 670 $ 390 $ 10 $ 730 $ 420 $ -20 $ 700

So there will be $700 on margin account after 3rd day.

Q16.

Margin requirement (80% of deal) 800 Account balance = 80% of deal Cumulative Profit/Loss = as margin requirement + Price Current price - Deal price cumulative profit/loss $ 1,000 - 800 $ 1,250 $ 250 $ 1,050 $ 1,300 $ 300 $ 1,100 $ 1,120 $ 120 $ 920

So in this case, there will be $920 after the third day.