ch03_ShortSelling - b. If after one year, the stock price...

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FINAN520 chapter 3 Short selling In-class exercise You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. a. How much cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?
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Unformatted text preview: b. If after one year, the stock price falls to $40 per share. You buy stocks at this price and close your position. What is your rate of return? c. 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?...
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