MathMaster logo

MathMaster

  1. Home
  2. general
  3. abc corporation is a start up company that went public in january 2024 its ipo was initially priced at 50 per share but by
Question

ABC Corporation is a start-up company that went public in January 2024. Its IPO was initially priced at £50 per share, but by March 2024 its price reached £70 per share. Assume you have £10,000 to invest and the initial margin requirement is 50% of total funds. You decide to buy on margin at the current price of £70 per share. The maintenance margin call is set at 30%.Question: After the short sale, the share price rises to £85 per share. Compute your new equity value and determine whether you will receive a margin call. I need process thank

74

likes
368 views

Answer to a math question ABC Corporation is a start-up company that went public in January 2024. Its IPO was initially priced at £50 per share, but by March 2024 its price reached £70 per share. Assume you have £10,000 to invest and the initial margin requirement is 50% of total funds. You decide to buy on margin at the current price of £70 per share. The maintenance margin call is set at 30%.Question: After the short sale, the share price rises to £85 per share. Compute your new equity value and determine whether you will receive a margin call. I need process thank

Expert avatar
Frederik
4.6
103 Answers
Given:
Initial price per share = £70
Initial margin requirement = 50%
Maintenance margin requirement = 30%
Initial investment = £10,000

1. Calculate the number of shares purchased:
Total funds available = Initial investment/(Initial margin requirement) = £10,000 / 0.5 = £20,000
Number of shares purchased = Total funds available / Share price = £20,000 / £70 ≈ 285.71 shares (rounded to 2 decimal places)

2. Calculate the initial equity value:
Equity value = Total funds available - Loan = Total funds available - (Total funds available * Initial margin requirement) = £20,000 - £10,000 = £10,000

3. Determine the new total value after the share price rises to £85:
New total value = Number of shares * New share price = 285.71 * £85 ≈ £24,285.35

4. Calculate the new equity value:
New equity value = New total value - Loan = New total value - (Total funds available * Initial margin requirement) = £24,285.35 - £10,000 ≈ £14,285.35

5. Determine if there will be a margin call:
To determine if there is a margin call, we compare the new equity value with the maintenance margin requirement. If the new equity value is less than 30% of the new total value, a margin call will occur.

New equity percentage = (New total value - Loan) / New total value * 100
New equity percentage = £14,285.35 / £24,285.35 * 100 ≈ 58.78%

Since the new equity value percentage is above the maintenance margin requirement of 30%, there will be no margin call.

Therefore, \boxed{\text{New equity value is £14,285.35 and there will be no margin call.}}

Frequently asked questions (FAQs)
Math question: Find the amplitude of the sine function f(x) = sin(x).Answer: The amplitude of the sine function f(x) = sin(x) is 1, as the maximum value of sin(x) is 1, and the minimum value is -1. Thus, the difference between the maximum and minimum values, which represents the amplitude, is 1. Using the
+
What is the surface area of a right circular cylinder with radius r and height h? (S = 2πrh + 2πr^2)
+
What is the graph of the logarithmic function f(x) = log(base 2)(x+3) - 1?
+
New questions in Mathematics
The data set (75, 85, 58, 72, 70, 75) is a random sample from the normal distribution No(µ, σ). Determine a 95% two-sided confidence interval for the mean µ .
what is the annual rate on ​$525 at 0.046​% per day for 3 months?
4x-3y=5;x+2y=4
A soft drink machine outputs a mean of 23 ounces per cup. The machines output is normally distributed with a standard deviation of 3 ounces. What is the probability of filling a cup between 26 and 28 ounces round your answer to four decimal places
Log(45)
In a grocery store, when you take out 3 peppers and 4 carrots, there are 26 peppers and 46 carrots left. How many peppers and carrots were there initially?
Suppose you have a sample of 100 values from a population with mean mu = 500 and standard deviation sigma = 80. Given that P(z < −1.25) = 0.10565 and P(z < 1.25) = 0.89435, the probability that the sample mean is in the interval (490, 510) is: A)78.87% B)89.44% C)10.57% D)68.27%
Three squares have a total area of 35.25 𝑐𝑚2 . The larger square has twice the side-length of the middle-sized square. The smaller square has its side length exactly 0.5 cm smaller than the middle-sixed square. Find the side lengths of each of the three squares.
reduce the expression (7.5x 12)÷0.3
If a two-branch parallel current divider network, if the resistance of one branch is doubled while keeping all other factors constant, what happens to the current flow through that branch and the other branch? Select one: a. The current through the doubled resistance branch remains unchanged, and the current through the other branch decreases. b. The current through the doubled resistance branch decreases, and the current through the other branch remains unchanged. c. The current through the doubled resistance branch increases, and the current through the other branch remains unchanged. d. The current through both branches remain unchanged.
P(Z<z)=0.1003
1. A capital of $3,831 was lent, and it has produced interest of $840 from 05-12-2022 to 1-12-2023. At what annual simple interest rate was the capital lent?
Professor Vélez has withdrawn 40 monthly payments of $3,275 from her investment account. If the investment account yields 4% convertible monthly, how much did you have in your investment account one month before making the first withdrawal? (Since you started making withdrawals you have not made any deposits.)
Buffalo Company makes and sells shampoo. Each unit requires $1.40 labor costs, material costs per unit are $0.90 and other variable costs are $0.30. It sells shampoo for $4.45 to retailers. Fixed costs are $15,000. It sold 25,000 units in the current month. What is the Break-Even point in units? What is the Break-Even point in dollars? What is the contribution margin of Buffalo Company?
Write the equation of the line that is parallel to y= 4x-7 and has a y- intercept at (0,5)
Which statement best describes the key changes in perspectives on inclusion? An inclusive program must consider the unique experiences of every child and family as well as the child's strengths and needs. There is a shift in thinking about individual programs as "inclusive programs" to thinking about inclusion as something that reflects the cultural influence of the family. There is a greater emphasis on barriers to full participation and the acknowledgement that all children are unique and must be fully and meaningfully engaged in a program. In an inclusive program all participants are accepted by their peers and other members of the community.
To find the increased amount on a standard term deposit with the following conditions: starting amount: BGN 13000, type of deposit: annual, annual compound interest rate: 1.4%, after 4 years;
A block slides across the floor with a force of 20N, which has an angle of 30°. The mass of the block is 2kg and the coefficient of friction is 0.1. Calculate the value of all the forces involved in this system and finally the value of the acceleration.
Write decimal as the fraction 81/125 simplified
Matilde knows that, when driving her car from her office to her apartment, she spends a normal time of x minutes. In the last week, you have noticed that when driving at 50 mph (miles per hour), you arrive home 4 minutes earlier than normal, and when driving at 40 mph, you arrive home 5 minutes earlier later than normal. If the distance between your office and your apartment is y miles, calculate x + y.

You might be interested in