Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $30 per share. The initial margin requirement was 50%. (The margin

image text in transcribed
image text in transcribed
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $30 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 $30 to $38.50, and the stock has paid a dividend of $2.40 per share. a. What is the remaining margin in the account? Answer is complete and correct. Remaining margin $4,100 b-1. What is the margin on the short position? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. 70.05 % 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.) Answer is complete but not entirely correct. (72.66) % retum

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