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(Solution Download) Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $60 per share


 

 

 

 

 

 

 

Old Economy Traders opened an account to short-sell 1,000 shares

 

of Internet Dreams at $60 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 $60 to $69.50, and the

 

stock has paid a dividend of $7.80 per share.

 

 


 

 

 

 

 

 

 

 

 

a.

What is the remaining margin in

 

the account?

 


 

 

 

 

 

 

 

 

  Remaining

 

margin

$

 


 

 

 

 

 

 

 

 

b-1.What is the margin on the short

 

position? (Round your answer to 2 decimal

 

places.)

 


 

 

 

 

 

 

 

 

  Short margin%

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b-2.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? (Negative

 

value should be indicated by a minus sign. Round your answer to 2

 

decimal places.)

 

 


 

 

 

 

 

 

 

 

  Rate of return%

 


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