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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose that you sell short 500 shares of Intel, currently selling for $40 per share, and give your broker $15,000 to establish your margin account. (LO 3-4)
If you earn no interest on the funds in your margin account, what will be your rate of
return after one year if Intel stock is selling at (i) $44; (ii) $40; (iii) $36? Assume that Intel pays no dividends.
If the maintenance margin is 25%, how high can Intel’s price rise before you get a
margin call?
Redo parts ( a ) and ( b ), but now assume that Intel also has paid a year-end dividend of
$1 per share. The prices in part ( a ) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.
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