Construct the account balance sheet

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You decide to short 100 shares of GME at $300 as you believe the stock price is overvalued. The initial margin and maintenance margin requirement is 50% and 30% respectively. Ignoring margin interests.

a) Construct the account balance sheet once the short selling position is set.

b) Calculate the annual percentage return (APR) and the effective annual return (EAR) of your trading strategy if you settle your position at the price of $270 in 20 days later, assuming that a year has 360 days.

c) Calculate the price level that you will receive margin call. d) Explain why short selling may not be a good 'investment'.

Reference no: EM133036171

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