(Margin Purchase and Selling Short) You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance. a. What is the initial equity in your account? Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month: Month Microtech Inc. King Tools Corp. October $51 $48 November 39 62 December 37 40
(Margin Purchase and Selling Short) You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance. a. What is the initial equity in your account? Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month: Month Microtech Inc. King Tools Corp. October $51 $48 November 39 62 December 37 40
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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You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance.
a. What is the initial equity in your account?
b. Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month:
|
Month |
Microtech Inc. |
King Tools Corp. |
|
October |
$51 |
$48 |
|
November |
39 |
62 |
|
December |
37 |
40 |
Transcribed Image Text:(Margin Purchase and Selling Short) You are very optimistic about the personal computer industry,
so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine
tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires
a 40 percent margin balance.
What is the initial equity in your account?
b. Assume the price of each stock is as follows for the next three months (month-end). Compute
the equity balance in your account for each month:
Month
Microtech Inc.
King Tools Corp.
$48
w w n m W
October
$51
November
39
62
December
37
40
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