Question

Using a margin account, 1863 shares are short sold for $13 per share. The initial margin requirement is 40%. If the price of the stock rises to $55 per share, what is the margin in the account now?

Answer 1

The margin in the account now is approximately 73.7%.

Step-by-step explanation:

The margin in the account can be calculated using the formula:

Margin = (Total Value of Short Sale - Current Value of Shares) / Total Value of Short Sale

Given that the initial margin requirement is 40%, the total value of the short sale is determined by multiplying the number of shares (1863) by the initial selling price ($13 per share). The current value of the shares can be calculated by multiplying the number of shares (1863) by the current price ($55 per share). Substituting these values into the formula:

Margin = (1863 * $13 - 1863 * $55) / (1863 * $13)

After evaluating the expression, the margin in the account now is approximately 73.7%.