In: Finance
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?
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.