1. "The Dow Jones Industrial Average is one of the best stock market indexes available." True, false, uncertain. Explain. 

2. You bought 300 shares of AMR Corporation at the current market price of $ 60. The initial margin requirement is 70%, and the maintenance margin is 40%.

 

a. At what stock price would you face a margin call?

b. If the stock price suddenly dropped to $25, How many shares should be sold to restore the margin?

c. If the price increases to $ 80, how many shares can be bought without any additional cash contribution to the account (Ignore b)?

 

3  3. You short-sold 100 shares of Boeing at the current price of $210. The initial margin is 60%, and the maintenance Margin is 40%.

1. At what stock price would you face a margin call?
2. Suppose the stock went up to $260; how many shares should be sold to restore the Margin?