Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Old Economy Traders opened an account to short - sell 1 , 0 0 0 shares of Internet Dreams at $ 7 0 per share.

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $70 per share. The initial margin requirement was 50%.(The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $70 to $82.50, and the stock has paid a dividend of $10.00 per share.
a. What is the remaining margin in the account?
Remaining margin $ =
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin %=
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
Yes
No
c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return %=

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions