On 21" Feb, you sold 800 shares of Ace stock for $24,000. The sale was a short sale with an initial margin requirement of 70 percent. The maintenance margin is 40 percent. On 23"d Feb, some positive news concerning the company was released and the stock price jumped this morning to $35.00 a share until the end of the day. On 24th Feb, the stock price jumped further to $38.00 a share. Construct a statement of financial position on each date and state if margin call is received. If it is subject to margin call, construct a statement of financial position after the margin call assume that you fulfil the margin call requirement. Example: Short Sales, I. You short 100 shares of AT&T (T) at $30 per share. 50% initial margin (here you deposit $ 1,500) and a 40% maintenance margin on short sales. The market value of stock borrowed that is sold short is: $30 x $100 = $3,000. $3,000 is a liability: You are obligated to buy AT&T shares later at the market value. $ 1230 A ANAN 1 2100MAT&T (1) HARSH$14 : 30 ARx 100 AR - 3 . 000 AR . Liabilities and Assets Account Equity Sale Proceeds $ 3,000 Short Position $ 3,000 Initial Margin Deposit $ 1,500 Account Equity $ 1,500 Total $ 4,500 Total $ 4,500 . 2-29 Copyright @ 202 1 McGrow-Hil ghts reserved. No reproduction or distribution without the prior written consent of McGrow-Hill Education. Example: Short Sales, II. AT&T stock price falls to $20 per share. Sold at $30, value today is $20, so you are "ahead" by $10 per share, or $1,000. The market value of the shares is $2,000. W. 30 AANANAS . 4X03012 20 Ax . MUN me on 10 ER . P 1 . 000 You liability is now $2,000. Ax - 80 $14 2 . 000 AR . MAKEA 2. 000 AA - APP . HERE : $2 . 500 / $2 . 000 = 125% Also, new margin: $2,500 / $2,000 = 125% Liabilities and Assets Account Equity Sale Proceeds $ 3,000 Short Position $ 2,000 Initial Margin Deposit $ 1,500 Account Equity $ 2,500 Total $ 4,500 Total $ 4,500 2-30 Copyright @ 2021 McGrow-Hil Educo All rights reserved. No reproduction or distribution without the prior written coment of McGrow-Hill Education. Example: Short Sales, III. AT&T stock price rises to $40 per share. You sold short at $30, stock price is now $40, you are "behind" by $10 per share, or $1,000. ("He who sells what isn't his'n, must buy it back-or go to prison.") The market value of the shares is $4,000. The short position liability is $4,000. 891 : Hand - $500 / $4 . 000 - 12.5X - 90X . On . 1529 LEmen. Also: new margin = $500 / $4,000 = 12.5%