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Suppose that you short sell 500 shares of Strand Corporation stock at $150 per share. The initial margin requirement is 50 percent and the maintenance
- Suppose that you short sell 500 shares of Strand Corporation stock at $150 per share. The initial margin requirement is 50 percent and the maintenance margin requirement 30 percent.
- How much is the short sale deposit that you must maintain in your brokerage account in order to meet the initial margin requirement? (8 pts)
- How high can the price of Strand stock go before a margin call is triggered? (8 pts)
- Briefly explain why an investor might want to engage in short selling? It is sometimes said that short selling is riskier than holding a long position. Is this true? Explain. (7 pts)
- How much is the short sale deposit that you must maintain in your brokerage account in order to meet the initial margin requirement? (8 pts)
- How high can the price of Strand stock go before a margin call is triggered? (8 pts)
- Briefly explain why an investor might want to engage in short selling? It is sometimes said that short selling is riskier than holding a long position. Is this true? Explain. (7 pts)
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
