You believe the stock in Freeze Frame Co. is going to fall, so you short 900 sha
ID: 2728285 • Letter: Y
Question
You believe the stock in Freeze Frame Co. is going to fall, so you short 900 shares at a price of $45. The initial margin is 50 percent.
Construct an equity balance sheet for a stock price of $40 per share. (Input all amounts as positive values. Omit the "$" sign in your response.)
What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
%
What is your effective annual return if you cover your short position at this price in 5 months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Liabilities and account equity
$
Construct an equity balance sheet for a stock price of $40 per share. (Input all amounts as positive values. Omit the "$" sign in your response.)
2-b.What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
%
2-c.What is your effective annual return if you cover your short position at this price in 5 months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Effective annual return %Explanation / Answer
Assets liability
proceeds of sale = 40,500 short sales 36,000
margin =20250 account equity 24,750
margin now 68.75
Annual return on investment (4,500/60,750)12/5*100
17.77
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