Old Economy Traders opened an account to short-sell 1,500 shares of Internet Dreams from the previous question. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $45 to $55, and the stock has paid a dividend of $1.25 per share.

If the maintenance margin requirement is 30%, will Old Economy receive a margin call? What is the rate of return on the investment?

A. Margin on short position is 20%, thus there will be a margin call. The rate of return is -55.0%

B. Margin on short position is 31%, thus there will be not a margin call. The rate of return is -50.0%

C. Margin on short position is 20%, thus there will be a margin call. The rate of return is -50.0%