Question

"A customer has an existing short margin account with credits of $16,000 and a short position in ABC stock worth $10,000. The SMA in the account is $1,000. If the market value of ABC falls to $9,000, the equity is:"

Answer 1

Answer:

Equity= $7,000

Explanation:

A customer has an existing short margin account that contains credit of $16,000

The short position in ABC stock is worth $10,000

The SMA in the account is $1,000

Therefore, if the market value of ABC falls down to $9,000 then, the equity can be calculated as follows

Equity= $16,000-$9,000

=$7,000

Hence the equity is $7,000