Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $40 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 $40 to $50, and the stock has paid a dividend of $2 per share.

Required:

a. What is the remaining margin in the account?

b-1. What is the margin on the short position?

b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?

multiple choice

• Yes

• No

c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign.)