Aastha wants to short 500 shares of LC at $18 a share, while Brian wants to buy 500 at the same price on margin. If both face an initial margin requirement of 60% and a maintenance margin requirement of 50%, determine how much cash each must have in order to enter this transaction. Suppose that each of them has exactly the required amount of cash, and they enter their desired positions.
Aastha wants to short 500 shares of LC at $18 a share, while Brian wants to buy 500 at the same price on margin. If both face an initial margin requirement of 60% and a maintenance margin requirement of 50%, determine how much cash each must have in order to enter this transaction. Suppose that each of them has exactly the required amount of cash, and they enter their desired positions.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Find the price at which Aastha will get a margin call, and the price at which Brian will get a margin call.
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