Old Economy Traders opened an account to short sell 1,500 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 $65, and the stock has paid a dividend of $1.50 per share. a. What is the remaining margin in the account? (Round your answer to the nearest whole number.) Remaining margin b. 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? (Round your answer to 2 decimal places. Negative value should be indicated by a minus sign.) Rate of return %
Old Economy Traders opened an account to short sell 1,500 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 $65, and the stock has paid a dividend of $1.50 per share. a. What is the remaining margin in the account? (Round your answer to the nearest whole number.) Remaining margin b. 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? (Round your answer to 2 decimal places. Negative value should be indicated by a minus sign.) Rate of return %
Chapter7: Stocks (equity) - Characterstics And Valuation
Section: Chapter Questions
Problem 11PROB
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