(A) Adequate Information: In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price. To calculate: The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker Introduction: Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

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Answer 1

Question

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

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You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share.a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $47 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share. Required:a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.)

Answer 2

Question

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Expert Solution & Answer

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Answer 3

Question

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Expert Solution & Answer

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Answer 4

Question

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 6

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Answer 7

Chapter 3, Problem 10PS

Summary Introduction

(A)

Adequate Information:

In this situation, the current market price of the telecom share is $50 and the investor has decided to short sell 100 shares at the prevailing price.

To calculate:

The value of securities or cash that need to be kept in the trading account so as to satisfy the 50% requirement of the initial margin by the broker

Introduction:

Brokerage account refers to the arrangement underlying a licensed broker and an investor. The broker allows the investor to add funds in the account that he has opened with the firm and buy or sell, the investment in lieu of a commission or brokerage fees charged by broker on each order

Answer 8

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 9

Summary Introduction

(B)

To calculate:

The price of the stock that enables the investor to get margin call

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 3 - Prob. 1PS Ch. 3 - Prob. 2PS Ch. 3 - Prob. 3PS Ch. 3 - Prob. 4PS Ch. 3 - Prob. 5PS Ch. 3 - Prob. 6PS Ch. 3 - Prob. 7PS Ch. 3 - Prob. 8PS Ch. 3 - Prob. 9PS Ch. 3 - Prob. 10PS

Solution Summary: The author explains how the investor can get margin call when he deposits securities or money to satisfy the 50% requirement of the initial margin.

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Chapter 3 Solutions