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Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $125 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 $125 to $137.00, and the stock has paid a dividend of $21.00 per share. Required: 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 %

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $125 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 $125 to $137.00, and the stock has paid a dividend of $21.00 per share. Required: 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 %

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $125 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 $125 to $137.00, and the stock has paid a dividend of $21.00 per share. Required: 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? O Yes O 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 %
Transcribed Image Text:Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $125 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 $125 to $137.00, and the stock has paid a dividend of $21.00 per share. Required: 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? O Yes O 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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