Assume that the price goes down to 70 are you making money

Reference no: EM13476898

Suppose a stock is trading at $100 per share. You ask your broker to sell short 1,000 shares. Assume your broker has a 50% margin requirement on short sales and requires a 30% maintenance margin. Ignore commissions and interest.

a. Suppose the price goes down to $70. Are you making money or losing money? How much? What is your rate of return?

b. How far can the price go up before you get a margin call?

Reference no: EM13476898

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