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Yiu open a margin account at a broker You subsequently short 250 shares of Citigroup at $78, believing it to be overpriced. The initial margin
Yiu open a margin account at a broker You subsequently short 250 shares of Citigroup at $78, believing it to be overpriced. The initial margin requriement is 55%. A. If the maintenance margin is 35%, at what price do you receive a margin call? (Ignore dividends) B. Exactly one year later, the stocks price has risen to $86 a share, at which point you cover your short posotion. Citigroup has paid a dividend of $2 per share for the year. Calculate your rate of return on this investment (i.e percentage change in your net equity value).
Yiu open a margin account at a broker You subsequently short 250 shares of Citigroup at $78, believing it to be overpriced. The initial margin requriement is 55%.
A. If the maintenance margin is 35%, at what price do you receive a margin call? (Ignore dividends)
B. Exactly one year later, the stocks price has risen to $86 a share, at which point you cover your short posotion. Citigroup has paid a dividend of $2 per share for the year. Calculate your rate of return on this investment (i.e percentage change in your net equity value).
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