Assume that you sell short 500 shares of Nabil stock for Rs. 400 per share. The initial margin and maintenance margin requirements are 50 percent and…
BBS Fundamentals of Investment · 2080 · Solved Question with Answer
Assume that you sell short 500 shares of Nabil stock for Rs. 400 per share. The initial margin and maintenance margin requirements are 50 percent and 30 percent respectively.
a. What is the initial value of debt and equity in your margin account?
b. If the stock price increases to Rs. 450 per share, what will be the value of debt and equity in your margin account?
c. Do you receive a margin call if the price of stock increases to Rs. 450?
d. What will your rate of return be if Nabil stock is trading at Rs. 380?