Question
Your broker, Tonald Drump, allowed you to short sell 3000 shares of Formica stocks on September 15 th . The market price was $48/stock. Your
Your broker, Tonald Drump, allowed you to short sell 3000 shares of Formica stocks on September 15th. The market price was $48/stock. Your initial margin is 50% and maintenance margin is 35%. On October the 12th, Formica stocks soared to $57/stock. Would Tonald ask you to deposit more money? Why or why not? If the answer is yes, assume that you did come up with the extra money. If the answer is no, obviously no new money has to be deposited. Now, on November the 16th, at your relief, the price of Formica came down to $34.75/stock. You decide to close your short position and Tonald returns your money. How much will he give you back? If you take your initial deposit (plus any margin calls if issued and met) as your investment, how much, in percentage terms, did you make from this short sale? |
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