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
89 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)
Question: Solve the equation 4x + 7 = 3x + 10.
+
What are the period and amplitude of the tangent function f(x) = tan x?
+
Math question: What is the slope-intercept equation of a line passing through the points (2, 3) and (4, 9)?
+
New questions in Mathematics
A book is between 400 and 450 pages. If we count them 2 at a time there is none left over, if we count them 5 at a time there is none left over and if we count them 7 at a time there are none left over, how many pages does the book have?
How many percent is one second out a 24 hour?
How many kilometers does a person travel in 45 minutes if they move at a rate of 8.3 m/s?
A juice shop prepares assorted juices, for their juices they have 5 different types of fruit. How many types of assortments can be prepared in total, if it is considered an assortment to a juice made with two or more fruits?
The actual length of an object is 1.3 m . If the blueprint uses a scale of 1 : 12 , what is the length of the line on the drawing?
Sean must chose a 6- digit PIN number for his online banking account.Each digit can be chosen from 0 to 9. How many different possible PIN numbers can sean chose.
The sum of two numbers is equal to 58 and the largest exceeds by at least 12. Find the two numbers
If f(x,y)=6xy^2+3y^3 find (∫3,-2) f(x,y)dx.
78 percent to a decimal
The thermal representation f(x) = 20 times 0.8 to the power of x is known from an exponential function f. Specify the intersection point with the y-axis
effectiveness of fiscal and monetary policy under closed and open economies
The mass of 120 molecules of X2C4 is 9127.2 amu. Identify the unknown atom, X, by finding the atomic mass. The atomic mass of C is 12.01 amu/atom
The area bounded by the curve y=ln(x) and the lines x=1 and x=4 above the x−axis is
X^3 - x^2 - 4 = 0, what are the values of x?
Write the inequality in the form of a<x<b. |x| < c^2
there are 500,000 bacteria at the end of a pin point. 1000 bacteria can make a person sick. then bacteria at the tip of a pin point can make 500 people sick. Also, many people do not know that bacteria can (reproduce). Let's say there are 5 bacteria and we leave it for 15 minutes. bacteria will multiply to 10. if left for up to 30 minutes, 20 bacteria will form. if left up to 45 minutes. bacteria will multiply up to 40. every 15 minutes the bacteria will double 2. if you start with five bacteria that reproduce every 15 minutes, how manu bacteria would you have after 12 hours ?
2x-4=8
The inner radius of a spherical ball is 13 cm. How many liters of air are in it? Justify your answer!
-Please answer to the following questions: What is the price elasticity of demand? Can you explain it in your own words? What is the price elasticity of supply? Can you explain it in your own words? What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that? B-Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams. Make sure to properly cite and reference your academic or peer-reviewed sources (minimum 2).
Sin(5pi/3)