Question

You sell 100 shares of PGD short at a price of $50 per share. How much is your initial margin, given margin requirements of 40%? If the stock declines to $30 per share, what is your percentage gain or loss on the initial equity?    

Answer 1

Total value of the investment in stock = 100 Shares X $ 5 0 =		$                 5,000.00
Initial margin =		40%
Initial margin amount = $ 5,000 X 40% =		$                 2,000.00
It means initial equity amount =   $ 2000
Value of the stock is declince from $ 50 to $ 30 it means there is profit = $ 50-$30 = $ 20 Per shares
Total Profit = 100 Shares X $ 20 =	$                          2,000
% gain or loss on the initial Equity = Profit / Initial Equity
% gain or loss on the initial Equity = ( $ 2,000 / $ 2000)*100
% gain or loss on the initial Equity = 100%
Answer = Gain on initial equity = 100%