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XYZ Traders opened an account to short sell 500 shares of ABC Company. The initial margin requirement was 40%. (The margin account pays no interest.)
XYZ Traders opened an account to short sell 500 shares of ABC Company. The initial margin requirement was 40%. (The margin account pays no interest.) A year later the price of ABC Company has risen from $25 to $32, and the stock has paid a dividend of $1 per share. Maintenance margin is 25%.
(a) Compute the remaining margin in the account
(b) Will XYZ Traders receive a margin call?
(c) Compute the return on investment.
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