review+questions

review+questions - 1. You are bearish on the Disney stock,...

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1. You are bearish on the Disney stock, and decide to sell short 100 shares at the current market price of $28 per share. a. How much must you put into your brokerage account if the initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? c. You close out your short position at $25 per share three months later. Although during this period you did not get a margin call, but Disney paid out a quarterly dividend of 25 cents per share. What is your gain? (Ignore interests on margin and escrow accounts) 2. You sold a futures contract on corn at a futures price of 350 and at the time of expiration the price was 352. There are 5,000 bushels per contract and prices are quoted in cents per bushel. What was your profit or loss? 3. The current market price of a share of a stock is $80. You have invested in a put option on this stock that has a strike price of $75. What would be your strategy regarding this security? What
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This note was uploaded on 01/17/2012 for the course MGMT 141 taught by Professor Chernyshoff,n during the Fall '08 term at UC Irvine.

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review+questions - 1. You are bearish on the Disney stock,...

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