Question
You believe the price of Freeze Frame Company stock is going to fall, so you short 500 shares at a price of $66. The initial
You believe the price of Freeze Frame Company stock is going to fall, so you short 500 shares at a price of $66. The initial margin is 70 percent. Ignore dividends.
a. Construct the equity balance sheet for the original trade.
Note: Input all amounts as positive values.
b-1. Construct equity balance sheets for a stock price of $57 per share.
Note: Input all amounts as positive values.
b-2. What is your margin?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
b-3. What is your effective annual return if you cover your short position at this price in four months?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
c-1. Construct equity balance sheets for a stock price of $71 per share.
Note: Input all amounts as positive values.
c-2. What is your margin?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
c-3. What is your effective annual return if you cover your short position at this price in four months?
Note: 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.
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