Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Old Economy Traders opened an account to short-sell 2,300 shares of Internet Dreams at $66 per share. The initial margin requirement was 50%. (The margin

image text in transcribed

Old Economy Traders opened an account to short-sell 2,300 shares of Internet Dreams at $66 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 $66 to $70, and the stock has paid a dividend of $2.50 per share. a. What is the remaining margin in the account? (Round your answer to the nearest whole dollar.) b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call? No Yes c. What is the rate of return on the investment? (Round your answer to 2 decimal places. Negative value should be indicated by a minus sign.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Asset And Liability Management Volume 2

Authors: S. A. Zenios, W. T. Ziemba

1st Edition

0444528024, 978-0444528025

More Books

Students also viewed these Finance questions

Question

Draft a proposal for a risk assessment exercise.

Answered: 1 week ago