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You are bearish on Loser CO. and decide to sell short 100 shares at the current...

You are bearish on Loser CO. and decide to sell short 100 shares at the current market price of $49 per share. The initial margin is 50%. How high can the price of the stock go before you get a margin call if the maintenance margin is 25% of the value of the short position?

Round your answer to the nearest cent (2 decimal places).

Solutions

Expert Solution

Let S be the price at which margin call first occurs

(100*49+100*49*50%-100*S)/(100*S)<=25%

=>S>=(100*49+100*49*50%)/(100*25%+100)

=>S>=58.80

jeff jeffy answered 2 years ago
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