Question
You short 25,000 shares of FaceSpace, Inc. at $320/share. The initial margin requirement is 50% and the maintenance margin is 35%. (i) At what price
You short 25,000 shares of FaceSpace, Inc. at $320/share. The initial margin requirement is 50% and the maintenance margin is 35%.
(i) At what price per share will you get a margin call? How much money would you have lost if the stock did hit that price? (10 points)
(ii) Now assume the price of FaceSpace shares fall to $300 and you decide to "press you bet" by shorting more shares. You feel comfortable increasing the amount of your equitymargin back up to the dollar amount of your original position when the stock was pricedat $320/share. Assuming the initial margin percentage remains at 50%, how manyadditional shares could you short? (10 points)
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