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An investor sells short 500 shares of XYZ stock at the current market price of $70 per share. The initial margin requirement is 60% of
An investor sells short 500 shares of XYZ stock at the current market price of $70 per share. The initial margin requirement is 60% of the value of the short position. The broker requires a maintenance margin of 30% of the value of the short position.
A) How much cash must the investor deposit into her brokerage account?
B) Suppose that the stock price increases to $74 per share. What is the margin (as a percent) in the account after the price increase?
C) How far can the stock price increase before the investor gets a margin call?
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