KIC000009 - Short Sales Buying on Margin: Example 2 How far...

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•~-------_---I Buying on Margin: Example 2 How far would the year-end price need to fall to get a margin call if the maintenance margin is 30%7 0/< M' Account Equity o argm = Market Value of Position 200x P - $5,300 .30 2QOxP Solving for P, we get P = $J.1.fllD . <t . . . Short Sales: Example You are bearish on ICM. The current market price is $50 per share and you want to sell short 100 shares. How much cash and securities must you put into your brokerage account if the broker's initial margin requirement is 50%? How high can the price go before you get a margin call if the maintenance margin is 30%7 Short Sales: Example How high can the price go before you get a margin call if the maintenance margin is 30%? . Account Equity % Margin = Market Value of Position 7.500-100xP .30 = JOOxP Solving for P, we get P = $11JJB. Short Sales Short sales allow investors to profit from a decline in a security's Pri~by selling securities they do not own. How? By ~y.) I O~ from another investor. In 2002 abou~ 0;; ofthU.S. market capitalization of stocks was available fgJ; lending out (i.e. to be shorted) However, only about ,. J ~/o was actually sold short
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KIC000009 - Short Sales Buying on Margin: Example 2 How far...

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