Question
You are bearish on stock ABC, and its current market price is 100 per share. You ask your broker to sell short 100 shares. Your
You are bearish on stock ABC, and its current market price is 100 per share. You ask your broker to sell short 100 shares. Your broker has a 50% margin requirement on short sales, so you add 5,000 on your account with the broker. Holding period is one year. |
a. | If the maintenance margin is 40%, at which price you will get a margin call? |
b. | If you cannot allow yourself a loss higher than 1,000, which price-contingent order will you place and at which price? |
c. | ABC has paid a year-end dividend of 0.50 per share. Calculate your rate of return if, after one year the ex-dividend price per share is 88. |
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