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Question No 06 You are an active trader at DSE. Due to some legal issues of GP with government, you are expecting the price of
Question No 06 You are an active trader at DSE. Due to some legal issues of GP with government, you are expecting the price of GP will fall. You decide to sell short 500 shares of GP when it is selling at its yearly high of 350 Tk. Your broker tells you that your margin requirement is 45 percent. While you are short the stock, GP 5 pays a 50 Tk per share dividend. At the end of one year, you buy 500 shares of GP at 250 Taka to close out your position. The broker charges an 8 percent annual interest rate, and commissions are 2.73% of the stock value on the purchase and sale. a) What is your rate of return on the investment? ( 2 Marks) b) If the maintenance margin is 30%, how high can GP's price rise before you get a margin call? Assume that price increases immediately
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