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You are expecting Nike stock price to decrease during the next year. The stock is trading now at $20 per share and you have just

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You are expecting Nike stock price to decrease during the next year. The stock is trading now at $20 per share and you have just sold 100 shares using the short sell technique. One year after you entered this short position, Nike stock price increased to $23 per share. Regularly, Nike pays $2 per share as dividend at the end of the year. FOREX Trading Company, the broker you deal with, sets the following margin requirements: Margin Requirement rates Initial 50% Maintenance 30% 1. What is your initial margin? A) $2,500 B) $1,000 C) $2,000 OD) None of the above 2. What is your ending margin in this short sell position after 1 year? A) $1,000 B) $500 C) $3,000 D) ($500) OE) None of the above 3. At $23 stock price, will the broker send you a margin call at the end of the year?* A) No, since the maintenance margin is less than the margin rate OB) No, since the maintenance margin is more than the margin rate C) Yes, since the maintenance margin is less than the margin rate D) Yes, since the maintenance margin is more than the margin rate OE) None of the above 4. If you want to cover your losses and maintain you position open, how much additional money do you need to deposit in order to get back to the maintenance margin level?* O A) $0 OB) $690 C) $190 OD) $500 O E) None of above

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