Description of this paper

Old Economy Traders opened an account to short-sel...

Description

Solution


Question

Old Economy Traders opened an account to short-sell 1,060 shares of Internet Dreams at $46 per share. The initial margin requirement was 52%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $46 to $53, and the stock has paid a dividend of $4 per share. Required: (a) What is the remaining margin in the account? (Round your answer to the nearest dollar amount.Omit the "$" sign in your response.) Remaining margin $ (b) If the maintenance margin requirement is 27%, will Old Economy receive a margin call? (c) What is the rate of return on the investment? (Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign. Omit the "%" sign in your response.) Rate of return %

 

Paper#13599 | Written in 18-Jul-2015

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