Question
Nancy sells short 600 shares of a company at the current market price of $76 per share. The stock pays a $0.35 per share dividend
Nancy sells short 600 shares of a company at the current market price of $76 per share. The stock pays a $0.35 per share dividend while Nancy has the short sale outstanding.
(1) How much in cash or securities must Nancy put into her brokerage account if the brokers initial margin requirement is 50% of the value of the short position?
(2) How high can the price of the stock go before Nancy gets a margin call if the maintenance margin is 40% of the value of the short position?
(3) If stock price goes down to $60 per share, what is the remaining margin in percentage in the account? What is the rate of return on the investment?
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