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On January 30, 2024 the (closing) stock price of Tesla Inc (TSLA) was $191.59, and on February 9, 2024 the (closing) stock price of
On January 30, 2024 the (closing) stock price of Tesla Inc (TSLA) was $191.59, and on February 9, 2024 the (closing) stock price of Tesla Inc (TSLA) was $193.57. On January 30, 2024, you thought that the stock price of TSLA will decrease in the future because the Delaware court voided Elon Musk's $55.8 billion pay package. As a result, you shorted 2500 shares of TSLA on January 30, 2024. The initial margin requirement is 50% and the maintenance margin requirement is 30%. You use 1-month T-bills as additional collateral to satisfy the initial margin requirement. Assume that the interest rate on 1-month T-bills is zero, and the T-bill collateral and any short sale proceeds in your margin account do not earn interest from the broker. Ignore fees and taxes throughout this question. Assume a month has 30 days and a year has 360 days. a. Assume that TSLA did not pay any dividends between January 30, 2024 and February 9, 2024. i. (2 points) How much cash do you receive from your short sale on January 30, 2024? ii. (3 points) How much money do you need to invest in T-bills as additional collat- eral to satisfy the initial margin requirement? In other words, what is the dollar value of the T-bill collateral you need in your margin account to satisfy initial margin requirement? iii. (5 points) If you close out your short position on February 9, 2024, what is the annualized return on this 10-day short sale investment? iv. (5 points) Provide a snapshot of your brokerage account on February 9, 2024, i.e. calculate the value of your assets, liabilities, equity, and the percentage margin. Do you receive a margin call on February 9, 2024? Why? b. (5 points) Assume that TSLA paid a large dividend of $50 per share during the day of February 9, 2024 and this was the only dividend payment between January 30, 2024 and February 9, 2024. Provide a snapshot of your brokerage account on February 9, 2024 after the dividend was paid, i.e. calculate the value of your assets, liabilities, equity, and the percentage margin. Do you receive a margin call in this case? Why?
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