Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PSCM arranges a margin loan for its short sale of $981.7 million of Herbalife stock at a 50% initial margin. What is the dollar value

PSCM arranges a margin loan for its short sale of $981.7 million of Herbalife stock at a 50% initial margin. What is the dollar value of the initial margin that needs to be posted? What is the initial equity value in the margin account? Assume a maintenance margin of 30%.What would be the equity value if the stock rose by 5% (ie to $48.60 x 1.05 = $51.03)?Would there be a margin call at this stock price? How far can the stock price rise before there is a margin call? If Herbalife rose to $65, how much collateral would PSCM need to post to restore the initial margin?

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

Recommended Textbook for

Multinational Management

Authors: John B. Cullen

6th edition

1285094946, 1285094948, 9781285696744 , 978-1285094946

Students also viewed these Finance questions