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?

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.)

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Expert Solution

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

jeff jeffy answered 1 year ago

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