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16 April, 00:39

You short sold 1,100 shares of stock at a price of $29 and an initial margin of 55 percent. If the maintenance margin is 40 percent, at what share price will you receive a margin call? What is your account equity at this stock price?

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  1. 16 April, 04:37
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    No of stock = 1100

    Price of Stock = 29

    Short sale = 31900

    Initial Margin % = 55%

    Initial Margin = 17545

    Total value = 49445

    The earnings of the sale is 31900, which is deposited in our account for a total account value of $49,445 (31900+55%)

    Maintenance Margin = 40%

    Margin Call Value = 49445 / (1+0.4)

    Margin Call Value = 35317.86

    Price per share = 35317.86 / 1100

    Price per share = 32.11

    So a margin call will be triggered when the price of the shorted security rises to $32.11

    Margin Call Price = 32.11

    Account Equity = 32.11*1100

    Account Equity = 35318
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