You short sold 500 shares of stock at a price of 36 dollars and an inital...
You short sold 500 shares of stock at a price of 36 dollars and
an inital margin of 75 percent. if the maintenance margin is 25
percent, at what share price will you receive a margin call? what
is your account equity at this stock price?
Margin call price?
Account equity?
Homework Answers
Proceeds from short sale is = No of shares short sold * price per share = (500*36) = $ 18,000/.
Initial margin to be maintained is = (18000*75%) = $ 13,500/.
Therefore account value is = 18000+13500 = $ 31,500/.
Margin call price is = ( Account value/(shares sold + maintenance margin shares )
That is = (31500/(500+(500*25%))) = (31500/625) = $ 50.40/.
Margin call price is $ 50.40/.
Account equity is = Account value - margin value
That is = 31500-(500*50.40)
Account equity is = (31500-25200) = $ 6,300/.
Account equity is $ 6,300/.
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