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Vanyuwa [196]
2 years ago
5

Old Economy Traders opened an account to short-sell 1,900 shares of Internet Dreams at $58 per share. The initial margin require

ment was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $58 to $60, and the stock has paid a dividend of $3.50 per share. a. What is the remaining margin in the account
Business
1 answer:
a_sh-v [17]2 years ago
7 0

Answer:

45.67%

Explanation:

Calculation to determine the remaining margin in the account

First step is to calculate the 1 year price

1 year price=1900 shares*$58 per share

1 year price = $110,200

Second step is to calculate the Equity

Margin requirement is 50% so equity = 50%*$110,200

Margin requirement is 50% so equity =$55,100

Third step is to calculate the 1 year later price increase of 60

1 year later price increase to 60

$1900 shares*$60 per share =114,000

Fourth step is to calculate the Dividend

Dividend =$3.50 *1900

Dividend=$6,650

Now let calculate the Margin

Margin = $55,100/($114,000+$6,650)

Margin =$55,100/$120,650

Margin= 45.67%

Therefore the remaining margin in the account is 45.67%

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Do you agree with the following statement: AVC and MC intersect at the minimum of marginal cost. a. Yes, since an upward sloping
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a. Cash receipts from customers for services rendered

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b. Sale of long-term investments for cash

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Indication: <u>Investing activity</u> and <u>Cash Outflow</u>

d. Payment of income taxes

Indication: <u>Operating activity</u> and <u>Cash Outflow</u>

e. Bonds payable issues for cash

Indication: <u>Financing Activity</u> and <u>Cash Outflow</u>

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Indication: <u>Investing activity</u> and <u>Cash Outflow</u>

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Indication: <u>Operating activity</u> and <u>Cash Outflow</u>

<u />

<u>Definition of terms</u>

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