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John has 50,000 in cash in his margin account. The broker charges 6% on borrowed funds and commision of 3% on both buy and sell trades. Initial margin reqirement = 50% and maintenance margin = 30%. He uses maximum margin to SELL SHORT XYZ stock, currently trading at $34.9. XYZ pays no divdend. If he wants to maximize his margin, what is the max # of shares he could sell short, and what is the trigger margin price.
A) # of shares = 2703 margin trigger = 58.17
B) # of shares = 2703 margin trigger = 40.27
C) # of shares = 2865 margin trigger = 58.17
D) # of shares = 2865 margin trigger = 40.27
I would love the explanation for this problem. Im having problems with these calcluations b/c of SELLING SHORT and not buying long, in which the calculations seem to be str8 forward. |
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