Problem 2-9 You short sold 1,100 shares of stock at a price of $29 and an initia
ID: 2382451 • Letter: P
Question
Problem 2-9
You short sold 1,100 shares of stock at a price of $29 and an initial margin of 55 percent. If the maintenance margin is 40 percent, at what share price will you receive a margin call? What is your account equity at this stock price? (Do not round intermediate calculations. Round Margin call price to 2 decimal places. Omit the "$" sign in your response.)
You short sold 1,100 shares of stock at a price of $29 and an initial margin of 55 percent. If the maintenance margin is 40 percent, at what share price will you receive a margin call? What is your account equity at this stock price? (Do not round intermediate calculations. Round Margin call price to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
The proceeds of the sale, 31900, is deposited in our account for a total account value of $49,445 (31900+55%)
Price per share=35317.86/1100 = 32.11
So a margin call will be triggered when the price of the shorted security rises to $32.11
Margin Call Price = 32.11
Account Equity= 32.11*1100
= 35318
No of stock 1100 Price of Stock 29 Short sale 31900 Initial Margin % 55% Initial Margin 17545 Total value 49445Related Questions
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