Suppose that you have $82,500 to invest and would like to purchase 1500 shares o

Question

Suppose that you have $82,500 to invest and would like to purchase 1500 shares of ABC Corp.'s shares which are currently trading for $100.00 per share. Law requires that all brokers have an Initial Margin of 50% but your broker demands a 55% Initial Margin. Also, your broker requires 35% Maintenance Margin at all times.Suppose that, instead of going long (buying) ABC Corp.'s stock, you were actually shorting the stock. If the price went to $125 how much would you have in gained or lost from your original investment of $82,500?

a) +$37,500

b) +/- $0

c) -$13,751

d) -$45,000

Explanation / Answer

+$37,500

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