Question

In: Finance

You believe the stock in Freeze Frame Co. is going to fall, so you short 700...

You believe the stock in Freeze Frame Co. is going to fall, so you short 700 shares at a price of $80. The initial margin is 60 percent.

1.

Construct the equity balance sheet for the original trade. (Input all amounts as positive values. Omit the "$" sign in your response.)

             

  Assets

Liabilities and account equity

  Proceeds from sale        $    Short position $   
  Initial margin deposit    Account equity   
  Total $    Total     $   

              
      

2-a.

Construct an equity balance sheet for a stock price of $71 per share. (Input all amounts as positive values. Omit the "$" sign in your response.)

                    

  Assets

Liabilities and account equity

  Proceeds from sale $    Short position $   
  Initial margin deposit    Account equity   
  Total $    Total $   

                       

2-b.

What is your margin? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

                    

  Margin %

                

2-c.

What is your effective annual return if you cover your short position at this price in 4 months? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

                  

  Effective annual return %

                    

3-a.

Construct an equity balance sheet for a stock price of $85 per share.(Input all amounts as positive values. Omit the "$" sign in your response.)

                      
     

  Assets

Liabilities and account equity

  Proceeds from sale $    Short position $   
  Initial margin deposit    Account equity   
  Total $    Total $   


                   

3-b.

What is your margin? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

                       

  Margin %

                  

3-c.

What is your effective annual return if you cover your short position at this price in 4 months? (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

                 

  Effective annual return %

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