Short Sale Margin Calculations:

1) You sell short 300 shares of Microsoft which are currently selling at $30 per share. You post the 50% margin required on the short sale. The broker requires a 30% maintenance margin.

1. If you earn no interest on the funds in your margin account what will be your rate of return after one year if Microsoft is selling at $27? (Ignore any dividends)

2. What price would Microsoft need in order for you to receive a margin call? (assume that no margin interest is paid into your margin account)

Short Sale Margin Calculation

2) Suppose you sell short 100 shares of IBM corporation stock at a price of $125 at a 50% margin. Your maintenance margin has been set at 30%. What price would IBM shares have to reach before you get a margin call?