Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

( Watch the Picture! ) You believe the price of Freeze Frame Company stock is going to fall, so you short 8 0 0 shares

(Watch the Picture!)
You believe the price of Freeze Frame Company stock is going to fall, so you short 800 shares at a price of $60. The Initial margin is
60 percent. Ignore dividends.
a. Construct the equity balance sheet for the original trade.
Note: Input all amounts as positive values.
Answer is complete but not entirely correct.
b-1. Construct equity balance sheets for a stock price of $56 per share.
Note: Input all amounts as positive values.
Answer is complete but not entirely correct.
b-2 What is your margin?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
Margin
57.09ox%
b-3. What is your effectlve annual return if you cover your short position at this price in three months?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
Effective annua
return
%
c-1. Construct equity balance sheets for a stock price of $65 per share.
Note: Input all amounts as positive values.
Answer is complete but not entirely correct.
c-2 What is your margin?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
c-3. What is your effectlve annual return if you cover your short position at this price in three months?
Note: A negative value should be indicated by a minus sign. Do not round intermedlate calculations. Enter your answer as a
percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

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

Cost Of Capital In Managerial Finance

Authors: Dennis Schlegel

2015th Edition

3319151347, 978-3319151342

More Books

Students also viewed these Finance questions