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Initial Margin $12,840 - $6,100 $6,740

The current margin position for a short sale of 1,000 shares of stock for $21,400 with an initial margin requirement of 60% and maintenance margin of 30% is not a margin call, as the loss on the sale is less than the initial margin amount. For a short sale of 500 shares of stock at $19 per share with an initial margin of 65% and maintenance margin of 35%, the highest stock price before a margin call is $23.22. For a purchase of 1,300 shares at $12.75 per share with an initial margin of 70% and maintenance margin of 40%, the maximum percent decline in stock price before a margin call is 50%.

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118 views

Initial Margin $12,840 - $6,100 $6,740

The current margin position for a short sale of 1,000 shares of stock for $21,400 with an initial margin requirement of 60% and maintenance margin of 30% is not a margin call, as the loss on the sale is less than the initial margin amount. For a short sale of 500 shares of stock at $19 per share with an initial margin of 65% and maintenance margin of 35%, the highest stock price before a margin call is $23.22. For a purchase of 1,300 shares at $12.75 per share with an initial margin of 70% and maintenance margin of 40%, the maximum percent decline in stock price before a margin call is 50%.

Uploaded by

Liam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. Recently, you sold 1,000 shares of stock for $21,400.

or $21,400. The sale was a short sale with an initial margin


requirement of 60 percent. The maintenance margin is 30 percent. The stock is currently trading at $27.50 a share.
What is your current margin position in this stock?

Selling Price per share = $21,400 / 1,000 = $21.4


Initial Margin = $21,400 * 60% = $12,840
Maintenance margin = $21,400 * 30% = $6,420
Loss on sale = ($27.5 - $21.4) * 1000 = 6.1 * 1000 = 6,100
Initial Margin = $12,840 - $6,100 = $6,740
2. Matt short sold 500 shares of Tall Pines stock at $19 a share at an initial margin of 65 percent. The
maintenance margin is 35 percent. What is the highest the stock price can go before he receives a margin call?
P = {(500 * 19) + ( 500 * 19 * .65] / 500} / ( 1 + .35) = 23.22
3. Nelson purchased 1,300 shares of stock for $12.75 a share. The initial margin requirement is 70 percent and
the maintenance margin is 40 percent. What is the maximum percent by which the stock price can decline before he
receives a margin call?
P = {[1300 x 12.75 x (1 - .7)] / 1300}/ (1 - .4) = 6.375
Maximum percent decline = 1- (6.375/12.75) = .5 or 50%
4. Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440. She had
purchased these shares on margin 12 months ago at a cost per share of $35. The initial margin requirement on this
stock is 60 percent and the maintenance margin is 30 percent. Robin also needs to pay loan rate of 3.0 percent. What
is her total dollar return on this investment?
Initial investment = 800 x 35 x .6 = 16,800
Loan repayment = [800 x 35 x ( 1 - .6)] x [ 1 + (.12 + .049)

5. Rudolfo purchased 900 shares of stock for $62.20 a share six months ago. The initial margin requirement
on this stock is 75 percent and the maintenance margin is 40 percent. Rudolfo pays a 3% on his margin loan, what is
his holding period return if today when he sells it, stock price rises by 25%? What if the stock price declines by
25%? (note: 3% is annualized effective rate).
6. Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in
the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $56.90 a share
today. What is the DJIA index value at the close of trading today?
7. An index consists of the following securities 
Shares Yesterday's Today's
Stock
Outstanding Price Price
A 1,000 $32 $38
B 4,000 $22 $23
C 6,000 $57 $55
 Suppose the index is price-weighted. Current index divisor is 2.7. If after today, Stock B experience a 3-
for-1 split. What is the new divisor?
 If the index is value-weighted, what is the index level? Use yesterday as a base. Assume yesterday's index
level is 1,000.
 If the index is equally weighted. You have $1000 in the index yesterday. How should you rebalance your
positions today?

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