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Question #2 (a) Assume that you are planning to short sell 2,000 shares of Abyss Inc. The stock currently sells for $20 per share.
Question #2 (a) Assume that you are planning to short sell 2,000 shares of Abyss Inc. The stock currently sells for $20 per share. The initial margin requirement is 57%. When you complete the trade, how much cash will you have to leave at your broker? (b) Assume that the stock falls to $15 per share. Prepare your balance sheet assuming this is the only holding in your margin account. (c) How high could the price of Abyss stock rise before you would receive a margin call if the maintenance margin requirement is 35%?
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Step: 1
a To calculate the amount of cash you need to leave at your broker for the short sale trade of 2000 ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
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