1. You bought 1000 shares of Xerox at $80 at 50% initial margin.

 

a. If the stock price drops to $60, what is the % margin in the account? What is your rate of return? 

 

b. What if the stock goes to $90? 

 

c. If the maintenance margin is 25%, below what stock price will there be a margin call?

 

2. Suppose you sell short 1,000 shares of AT&T at $80?

 

a. Six months later the stock has dropped to $50. What is your profit? 

 

b. Suppose the stock begins to fall soon after your original short sale. At what price should you cover your position to make a gross profit of $20,000?