Explanation of short positions in stock markets

Reference no: EM1337930

1. In a detailed response please explain why do firms go public?

2. What are the possible reasons for, or sources of, long run IPO underperformances?

3. You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share.

a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position?

b. How high can the price of stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?

Please make sure answers are supported by two quality references each and all calculations.

Reference no: EM1337930

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