The stock price of Google is $549. You have $10,000 saved in a savings account. The monthly interest rate is 0.1%.

Attempt 1/10 for 10 pts.

Part 1

You think the stock price will go down soon, and want to trade 20 shares. What should you do? Enter 20 for buying 20 shares (on margin if necessary), or -20 for selling or short-selling 20 shares.

Correct

You should short-sell 20 shares to benefit from a decrease in the stock price: -20.

Attempt 2/10 for 10 pts.

Part 2

If the initial margin is 50%, what is the minimum additional dollar amount that you have to deposit in your brokerage account?

Correct

Short-selling 20 shares gives us some cash, which must be kept in the brokerage account:

Proceeds from short-selling = Number of shares * Stock price = 20 * 549 = 10,980

With an initial margin requirement of 50%, we have to add 50% of the proceeds from short-selling in the form of additional cash to the account:

Extra cash = 50% * 10,980 = 5,490

Attempt 4/10 for 10 pts.

Part 3

What is your initial percentage margin (entered as a decimal number) once you've completed the deposit calculated in part 2?

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Attempt 3/10 for 10 pts.

Part 4

Two months later, the stock price is $569. Google paid a dividend of $5 per share just before the two months were over. What is your percentage margin (entered as a decimal number)?

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