You decide to sell short 50 shares of Ford at $10 per share. The initial margin...

You decide to sell short 50 shares of Ford at $10 per share. The initial margin requirement is 50%. The maintenance margin is 40%. (Please show the work/equations!!! Thanks!)

1) How much cash (X) must we put into the brokerage account?

2) How high can the stock price be before a margin call?

3) Suppose stock price immediately declines to P = $9. What is the rate of return for this investor?

4) Suppose stock price immediately rises to P = $11. What is the rate of return for this investor?

Expert Solution

jeff jeffy answered 4 months ago

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You decide to sell short 50 shares of Ford at $10 per share. The initial margin...

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