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Suppose that you sell short 300 shares of CYSCO (CY), currently selling for $90 per share,...

Suppose that you sell short 300 shares of CYSCO (CY), currently selling for $90 per share, and give your broker $20,000 to establish your margin account.

  1. If you earn no interest on the funds in your margin account, what will be your rate of

    return after one year if CY stock is selling at $98? Assume that CY pays no dividends.

  2. If the minimum margin is 30 percent, how high can CY’s price rise before you get a margin

    call?

  3. Redo part (a) and (b), now assuming that CY’s dividend (paid at year-end) is $3 per share.

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Expert Solution

jeff jeffy answered 2 years ago
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