our analysis has indicated that the shares of Levi’s Riveting Co. are highly over-valued. To take advantage of this expectation, you decide to sell short 900 shares at $20 each. The initial margin for short sales in your brokerage account is set at 60% (i.e., 160% of the value of the short sale). The minimum margin requirement is 40%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction. If the price is $24 at the end of the period, what is your margin ratio at that point?
our analysis has indicated that the shares of Levi’s Riveting Co. are highly over-valued. To take advantage of this expectation, you decide to sell short 900 shares at $20 each. The initial margin for short sales in your brokerage account is set at 60% (i.e., 160% of the value of the short sale). The minimum margin requirement is 40%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction. If the price is $24 at the end of the period, what is your margin ratio at that point?
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
Problem 1PS
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INV 1 3b
Your analysis has indicated that the shares of Levi’s Riveting Co. are highly over-valued. To take advantage of this expectation, you decide to sell short 900 shares at $20 each. The initial margin for short sales in your brokerage account is set at 60% (i.e., 160% of the value of the short sale). The minimum margin requirement is 40%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction.
- If the price is $24 at the end of the period, what is your margin ratio at that point?
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