Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up P10,000 and borrow the rest. This is the balance sheet and margin: Balance Sheet:AssetAmount (P)LiabilitiesAmount (P)Investments in Ultra Universe Company40,000Margin Loan 30,000 Account Equity 10,000 Total Assets40,000Total Liabilities & Equities40,000Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25% QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What would the account balance sheet look like instead? Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put upP10,000 and borrow the rest. This is the balance sheet and margin:Balance Sheet:AssetAmount (P)LiabilitiesAmount (P)Investments in Ultra Universe40,000Margin Loan30,000CompanyAccount EquityTotal Liabilities & Equities10,000Total Assets40,00040,000Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25%QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60percent. What would the account balance sheet look like instead?

Given: Short of shares = 10,000 Price =P4 Initial margin = 60% Amount invested = P10,000

Answered: Suppose you want to buy 10,000 shares…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

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ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up P10,000 and borrow the rest. This is the balance sheet and margin:

Balance Sheet:

Asset	Amount (P)	Liabilities	Amount (P)
Investments in Ultra Universe Company	40,000	Margin Loan	30,000
		Account Equity	10,000
Total Assets	40,000	Total Liabilities & Equities	40,000

Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25%

QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What would the account balance sheet look like instead?

Suppose you want to buy 10,000 shares of Ultra Universe Company at a price of 4.00. You put up
P10,000 and borrow the rest. This is the balance sheet and margin:
Balance Sheet:
Asset
Amount (P)
Liabilities
Amount (P)
Investments in Ultra Universe
40,000
Margin Loan
30,000
Company
Account Equity
Total Liabilities & Equities
10,000
Total Assets
40,000
40,000
Margin = (Equity / Total Assets) = (10,000 / 40,000) = 25%
QUESTION: Supposed that you shorted 10,000 shares instead of buying. The initial margin is 60
percent. What would the account balance sheet look like instead?

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