Question

As an initial transaction in a new margin account, a customer sells short 100 shares of ABC at $20 per share. After the customer deposits the appropriate margin, the credit balance in the account will be:

Answer 1

$4,000

Step-by-step explanation:

Regulation T initial margin to short stock is 50% of $2,000 = $1,500 . However, since this is a new account, it must meet the minimum initial margin of $2,000 required to open the account, hence $2,000 must be deposited.

Therefore, the credit balance in the account will be;

= 2,000 + 2,000 ( 100 × $20)

= $4,000