You have opened a new account to sell short 1,000 shares of Nicola stock at $100/shr.Initial margin ratio was 60% and maintenance margin ratio is 40%. [Ignore Stock loan fees.]Initial price $100/shrCurrent price $110/shr[i] What is the threshold level of the closing price, at which triggering a margin call is in effect?|Closing price $115*/shr[ii] Since share price is rising, you want to reduce the size of your short position now (at $110/shr) to avoid margin callafter market close. If your target level of the maintenance margin ratio at close (your estimate: $115*/shr) is 45% (orabove), how many shares do you need to buy back now (at $110/shr) at least?

Margin call is the call which occurs when price goes below the maintenance ratio. When that happens…

You have opened a new account to sell short 1,000 shares of Nicola stock at $100/shr. Initial margin ratio was 60% and maintenance margin ratio is 40%. [Ignore Stock loan fees.] Initial price $100/shr Current price| $110/shr |Closing price|$115*/shr [i] What is the threshold level of the closing price, at which triggering a margin call is in effect? [ii] Since share price is rising, you want to reduce the size of your short position now (at $110/shr) to avoid margin call after market close. If your target level of the maintenance margin ratio at close (your estimate: $115*/shr) is 45% (or above), how many shares do you need to buy back now (at $110/shr) at least?

You have opened a new account to sell short 1,000 shares of Nicola stock at $100/shr. Initial margin ratio was 60% and maintenance margin ratio is 40%. [Ignore Stock loan fees.] Initial price $100/shr Current price| $110/shr |Closing price|$115/shr [i] What is the threshold level of the closing price, at which triggering a margin call is in effect? [ii] Since share price is rising, you want to reduce the size of your short position now (at $110/shr) to avoid margin call after market close. If your target level of the maintenance margin ratio at close (your estimate: $115/shr) is 45% (or above), how many shares do you need to buy back now (at $110/shr) at least?

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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Assume you sell short 100 shares of common stock at $30 per share, with initial margin at 50%. The maintenance margin is 35%. How far does the price of the stock rise for you to get a margin call? a) $33.33 b) $34.62 c) $32.14 d) $38.74 e) $40.50
The stock price of Atlantis Corp. is $43 today. The risk-free rate of return is 10%, and Atlantis Corp. pays no dividends. A call option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now is worth $5 today. A put option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now should be worth __________ today. A. $.05 B. $.14 C. $2 D. $3.95
An investor opens a margin account with an initial deposit of $5500. He then purchases 870 shares of a stock at $44. His margin account has a maintenance margin requirement of 30%. Ignoring commissions and interest, IF the price changed to 27 WHAT IS YOUR NEW EQUITY The correct answer is AT WHAT PRICE YOU WILL GET A MARGIN CALL PRICE?
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Help me please get the correct solution option match
Suppose that Xtel currently is selling at $46 per share. You buy 250 shares using $8,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 6%. Required: a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Xtel? b. If the maintenance margin is 25%, how low can Xtel's price fall before you get a margin call? c. How would your answer to (b) change if you had financed the initial purchase with only $5,750 of your own money? d. What is the rate of return on your margined position (assuming again that you invest $8,000 of your own money) if Xtel is selling after 1 year at: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Xtel? Assume that Xtel…
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Shopify, Inc common stock currently sells for $1,185.31 per share, and the standard deviation of returns is 68.35%. A put option with a strike price of $1,100 is currently trading on the market. The option expires in 0.15 years, and the risk-free rate of return is 4.3%. Shopify does not pay a dividend. What is rho (p) for this put option assuming a continuous model such as the Black-Scholes model? O 94.5148 O 93.8567 O 93.3034 O 70.6357

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