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Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams from the previous

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Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams from the previous problem. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share.;a. What is the remaining margin in the account?;b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?;c. What is the rate of return on the investment?;(BODIE, Zvi. Investments, 8th Edition. Irwin/McGraw-Hill, 062008. 11.9.3).

 

Paper#31780 | Written in 18-Jul-2015

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