Question
You are bearish on Company XYZ and decide to sell short 2,000 shares at the current market price of $60 per share. The brokers initial
You are bearish on Company XYZ and decide to sell short 2,000 shares at the current market price of $60 per share. The brokers initial margin requirement is 50% of the value of the short position, and the maintenance margin is 35% of the value of the short position. Answer the following questions and show all your calculations. (a) How much in cash must you put into your brokerage account at the beginning of the short sale? (3 marks) (b) At what price of the share XYZ would you receive a margin call? (3 marks) (c) What is your loss when you receive the margin call?
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