Question

In: Finance

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $50 per...

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $50 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $50 to $55.50, and the stock has paid a dividend of $6.50 per share.

a. What is the remaining margin in the account?

b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)


b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?

  • Yes

  • No

c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Old Economy Traders opened an account to short sell 1,600 shares of Internet Dreams at $52...
Old Economy Traders opened an account to short sell 1,600 shares of Internet Dreams at $52 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $52 to $60, and the stock has paid a dividend of $2.00 per share. a. What is the remaining margin in the account? (Omit the "$" sign in your response.)   Remaining margin $    b. If the maintenance margin requirement...
New Economy Traders opened an account to short sell 2,500 shares of Internet Hopes plc. The...
New Economy Traders opened an account to short sell 2,500 shares of Internet Hopes plc. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Hopes plc. has risen from £70 to £80, and the stock has paid a dividend of £3.5 per share. i) What is the remaining margin in the account? ii) If the maintenance margin requirement is 30%, will New Economy receive a margin call? iii) What is...
A trader opened an account to short-sell 1,000 shares of a tech stock at $120 per share.
A trader opened an account to short-sell 1,000 shares of a tech stock at $120 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of the stock has risen from $120 to $131.20, and the stock has paid a dividend of $20.00 per share. What is the remaining margin in the account?
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per...
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. a. How much of her own money does Dee invest when she purchases the stocks? (Note: this is her initial net worth.) b. What is the initial margin of her account? (Enter a percentage value in the box. Keep no decimal place.) Dée Trader opens a brokerage account and purchases 300...
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per...
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. a. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? (Keep no decimal place.) b. If the maintenance margin requirement is 30%, will she receive a margin call? yes...
Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $56 per...
Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $56 per share. She borrows $3,500 from her broker to help pay for the purchase. The interest rate on the loan is 9%. a. What is the margin in Dée’s account when she first purchases the stock? Margin            $ b-1. If the share price falls to $46 per share by the end of the year, what is the remaining margin in her account? (Round your answer...
Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $54 per...
Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $54 per share. She borrows $2,600 from her broker to help pay for the purchase. The interest rate on the loan is 11%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $44 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2...
Suppose that you sell short 1,000 shares of Intel, currently selling for $20 per share, and...
Suppose that you sell short 1,000 shares of Intel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Intel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Intel pays no dividends. b. If the maintenance margin is 25%, how high can Intel’s price rise before...
Suppose that you sell short 1,000 shares of Xtel, currently selling for $60 per share, and...
Suppose that you sell short 1,000 shares of Xtel, currently selling for $60 per share, and give your broker $45,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $66; (ii) $60; (iii) $54? Assume that Xtel pays no dividends. b. If the maintenance margin is 25%, how high can Xtel’s price rise before...
You sell 100 shares of PGD short at a price of $50 per share. How much...
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?    
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT