Assume you sell short 100 shares of common stock at $30 per share, with initial margin at 50%. The maintenance margin is 35%. How far does the priceof the stock rise for you to get a margin call?a) $33.33b) $34.62c) $32.14d) $38.74e) $40.50

Stock price:The market value of a certain stock or share in a corporation is referred to as the…

Answered: Assume you sell short 100 shares of…

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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Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent over that. You buy 800 shares of stock at $36 per share. You put up $14, 400. One year later, the stock is selling for $48 per share and you close out your position. What is your return assuming a dividend of $0.65 per share is paid?
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Assume you sell short 100 shares of common stock at $30 per share, with initial margin at 50%. The maintenance margin is 35%. How far does the price of the stock rise for you to get a margin call?