Question

In: Finance

Suppose you are bearish (pessimistic) on Dot Bomb stock, and its market price is $100 per...

Suppose you are bearish (pessimistic) on Dot Bomb stock, and its market price is $100 per

share. You tell your broker to sell short 1,000 shares.

(1) Suppose the broker has a 50% margin requirement on short sales and you put $50,000

in your account as margin. What will your percentage prot be if you close out your

position when Dot Bomb falls to $70 per share?

(2) Suppose the broker has a maintenance margin of 30% on short sales. How much can

the price of Dot Bomb stock rise before you get a margin call?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

ANSWER FOR 2ND QUESTION IS GIVEN BY ME IN TERMS OF PRICE = 115.38. IF IT IS REQUIRED IN % TERMS, LET ME KNOW, WILL DO THAT.

jeff jeffy answered 4 months ago
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