Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

16. Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams from the previous question. The initial margin requirement was 50%. (The

image text in transcribed
16. Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams from the previous question. 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. (2O 3-4) 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 short position (treating the initial margin as the amount invested)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analytical Finance Volume I

Authors: Jan R. M. Röman

1st Edition

3319340263, 978-3319340265

More Books

Students also viewed these Finance questions