Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You believe the price of Freeze Frame Co. stock is going to fall, so you short 700 shares at a price of $80. The initial

image text in transcribedimage text in transcribed

You believe the price of Freeze Frame Co. stock is going to fall, so you short 700 shares at a price of $80. The initial margin is 60 percent. Ignore dividends. a. Construct the equity balance sheet for the original trade. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit deposit Total Liabilities and account equity Short position Account equity 0 Total $ 0 $ b-1. Construct an equity balance sheet for a stock price of $71 per share. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity 0 Total S b-2. What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Margin b-3. What is your effective annual return if you cover your short position at this price in four months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Effective annual return c-1. Construct an equity balance sheet for a stock price of $85 per share. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity 0Total c-2. What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Margin 0 % c-3. What is your effective annual return if you cover your short position at this price in four months? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Effective annual return You believe the price of Freeze Frame Co. stock is going to fall, so you short 700 shares at a price of $80. The initial margin is 60 percent. Ignore dividends. a. Construct the equity balance sheet for the original trade. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit deposit Total Liabilities and account equity Short position Account equity 0 Total $ 0 $ b-1. Construct an equity balance sheet for a stock price of $71 per share. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity 0 Total S b-2. What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Margin b-3. What is your effective annual return if you cover your short position at this price in four months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Effective annual return c-1. Construct an equity balance sheet for a stock price of $85 per share. (Input all amounts as positive values.) Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity 0Total c-2. What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Margin 0 % c-3. What is your effective annual return if you cover your short position at this price in four months? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Effective annual return

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Safe Hiring Audit The Employers Guide To Implementing A Safe Hiring Program

Authors: Lester S. Rosen

1st Edition

1889150517, 978-1889150512

More Books

Students also viewed these Accounting questions

Question

The amount of work I am asked to do is reasonable.

Answered: 1 week ago

Question

The company encourages a balance between work and personal life.

Answered: 1 week ago