Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that you had $10,000 in cash in your brokerage account on August 1st. Your broker has an initial margin requirement of 60%. You maximize

Assume that you had $10,000 in cash in your brokerage account on August 1st. Your broker has an initial margin requirement of 60%. You maximize your investment in Amazon (AMZN), purchasing shares at the closing price on 8/1/2018. The total amount of shares you can purchase without buying a fractional share is 5.

Assume that you instead decide to short as many shares as possible of Amazon (AMZN) at market close on August 1st. The broker requires a 60% margin on short sales and has a 40% maintenance margin.

Close price 8/1/18 = $1791.17

Close price 8/31/18= $2012.71

A. How many shares did you short sell?

B. Set up your personal balance sheet following the transaction

C. Set up your personal balance sheet as of market close on 8/31/2018 (assuming no margin call)

D. Would you have received a margin call? What price would this occur at?

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

Distressed Debt Analysis Strategies For Speculative Investors

Authors: Stephen Moyer

1st Edition

1932159185, 978-1932159189

More Books

Students also viewed these Finance questions

Question

Data warehouses are subsets of data marts.

Answered: 1 week ago

Question

Distinguish between formal and informal reports.

Answered: 1 week ago