Global Investments

1. Recently, you sold 1,000 shares of stock for $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?

Assets = $21,400
Equity = $21,400 x .60 = $12,840
Short position = 1,000 x $27.50 = $27,500
Account equity = $21,400 + $12,840 - $27,500 = $6,740
Margin position = $6,740 / $27,500 = 24.51 %

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?

Assets = 500 x $19 = $9,500
Equity = $9,500 x .65 = $6175
$9,500 + $6,175 = $15,675
500P x .35 = 175P = 15,675 – 500P
P = $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?

Assets (1,300 x $12.75) = (16,575 x .70) =11,602.5 Equity
Liabilities 16,575 - 11,602.5 = 4972.5
.40 = (1300P - 4972.5)/ 1300P
P = $6.375 ($6.375 - $12.75)/$12.75 = 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?

800 Shares
$29440 Assets $35 cost per share $28000 x .6 = $16800 $28000 - $16800 = $11200
3% of $11200 = 336
$29440 -11536 = $17904
$17904 - $16800 = $1104

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.