A hedge fund with $$10$ million in net asset value has taken a long $$10$ million positon in AA Inc. and a short $$10$ million position in BB Inc. Both positions were opened at $$100$ per share. The margin requirement is $25\%.$ The BB share continues to trade at $$100$ while the share price of AA decreases. At which price will the hedge fund be forced to reduce its positions?

Question $7$Answer

a$.$

$$80\mathrm{.}0$

b$.$

$$33\mathrm{.}3$

c$.$

$$75\mathrm{.}0$

d$.$

$$50\mathrm{.}0$

e$.$

$$66\mathrm{.}7$

f$.$

$$0\mathrm{.}0$