Solution-Making the offsetting transaction

Making the offsetting transaction

Reference no: EM132611788

Assume you sell short 1,000 shares of The Sharp Company common stock at $35 per share, with initial margin at 55%. The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction. Ignore interest on margin.

a. What would be your rate of return if you repurchase the stock at $25 per share?

b. At what stock price would you receive a margin call if the maintenance margin is 30%?

c. How much new funds would you need to add to your account to respond the margin call if price rise to $45?

Reference no: EM132611788

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Making the offsetting transaction

Reference no: EM132611788

Reference no: EM132611788

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