Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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?

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_2

Step: 3

blur-text-image_3

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

Technical Analysis Of Stock Trends

Authors: Robert D. Edwards, John Magee, W.H.C. Bassetti

9th Edition

0814408648, 978-0814408643

More Books

Students also viewed these Finance questions

Question

3 When might constructivist view of self be not relevant and why?

Answered: 1 week ago