Suppose that instead Einar short sells 200 shares of German Power Weak Inc. at $40 each. NASDUCK now sets a margin requirement of 30%. (e) How much cash does Einar need to invest? (f) Calculate the margin call of NASDUCK if the price increases to $44. (g) Suppose the price falls to $25. How much cash can Einar take out from his margin account? (h) Suppose he takes out 50% of the amount in part (g). At what price threshold will Einar face a margin call by NASDUCK?

Suppose that instead Einar short sells 200 shares of German Power Weak Inc. at $40 each. NASDUCK now sets a margin requirement of 30%. (e) How much cash does Einar need to invest? (f) Calculate the margin call of NASDUCK if the price increases to $44. (g) Suppose the price falls to $25. How much cash can Einar take out from his margin account? (h) Suppose he takes out 50% of the amount in part (g). At what price threshold will Einar face a margin call by NASDUCK?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter6: Saving And Investing

Section6.2: Investing: Taking Risks With Your Savings

Problem 4R

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