Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. You

As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $122,382 worth of Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initial margin of 50% and a maintenance margin of 34%. You must also set aside 100% of the cash proceeds as collateral. You decide to short as many shares as you can with the collateral you have. Pay special attention that you cannot purchase/sell/trade fractional shares. How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points

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

Handbook On Second Lien Loans & Intercreditor Agreements

Authors: Mark N. Berman, Jo Ann J. Brighton

1st Edition

0981865593, 978-0981865591

More Books

Students also viewed these Finance questions