Calculate the price at which you will receive margin call

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Reference no: EM131972425

You decide to short Verizon (VZ) stock, currently trading at $50 per share. You have $12,000 in treasury bonds with which to finance your trade. Your brokerage requires 60% initial margin and a 30% maintenance margin and charges a 7.5% interest rate on margin cash borrowing. You maximize your position based on these rules. A year later, VZ increases to $55 per share. During the year, VZ issued $2 in dividends. Show your balance sheet at t=0 and t=1, then calculate the price at which you will receive a margin call.

Reference no: EM131972425

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