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Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $110 per share. The initial margin requirement was 50% (the margin
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $110 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 $110 to $117.00, and the stock has paid a dividend of $18.00 per share. Question 1. What is the remaining margin ($) in the account? a) $ 20 000 b) $ 25 000 c) $ 30 000 d) $ 35 000 Question 2. What is the % margin on the short position? a) 23.54% b) 25.64% c) 19.86% d) 20.72% Question 3. If the maintenance margin requirement is 30%, will Old Economy receive a margin call? a) Yes b) No Question 4. What is the rate of return on the investment? a) -45.45 % b) -35.35 % c) -37.80 % d) 10.50%
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