Suppose you short sell 1000 Intel shares at $20 per share and provide your broker with an initial margin deposit equal to 80% of the short sale value. The maintenance margin is 20% (of the short sale liability). The margin account plus the short sale proceeds earn interest for you at a rate of 0.1% per month (credited to your margin account). Intel will pay a $1 dividend per share in 1 month's time. Assume Intel's share price stays approximately flat for 2 months and then spikes upwards. How high can the share price spike to in 2 months' time so that you just avoid a margin call? a. $29.16 b. $29.22 c. $30.00 d. $30.06 e. None of the above

Suppose you short sell 1000 Intel shares at $20 per share and provide your broker with an initial margin deposit equal to 80% of the short sale value. The maintenance margin is 20% (of the short sale liability). The margin account plus the short sale proceeds earn interest for you at a rate of 0.1% per month (credited to your margin account). Intel will pay a $1 dividend per share in 1 month's time. Assume Intel's share price stays approximately flat for 2 months and then spikes upwards. How high can the share price spike to in 2 months' time so that you just avoid a margin call? a. $29.16 b. $29.22 c. $30.00 d. $30.06 e. None of the above

Name: Suppose you short sell 1000 Intel shares at $20 per share and provide
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Description: Suppose you short sell 1000 Intel shares at $20 per share and provide your broker with an initial margin deposit equal to 80% of the short sale value. The maintenance margin is 20% (of the short sale liability). The margin account plus the short sale

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

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