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Kim was pessimistic about the NoGo Corporation. She expected the prices of NoGos stocks to decrease significantly in the next few weeks and decided to
- Kim was pessimistic about the NoGo Corporation. She expected the prices of NoGos stocks to decrease significantly in the next few weeks and decided to short-sell 1000 NoGo shares at the current market price. The following was the limit order book of the NoGo stock when Kim placed her order.
Limit buy orders | Limit sell orders | ||
Price ($) | No of Shares | Price ($) | No of Shares |
29.75 | 400 | 30.25 | 100 |
29.5 | 800 | 31.5 | 100 |
29.25 | 500 | 34.75 | 300 |
29 | 200 | 38.25 | 100 |
28.5 | 600 |
i. Calculate the average price at which Kim sold the 1000 NoGo stocks.
ii. How much money Kim needs to put into her brokerage account if the brokers initial margin requirement is 60% of the value of the short position?
iii. Kim bought 1000 NoGo stocks for $28 per share to close her short position. Estimate the rate of return she earned on her investment. (assume no fees, no interest or dividends paid)? Show your calculations.
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