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Suppose that you sell short 200 shares of Intel, currently selling for $50 per share, and give your broker $6,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Intel stock is selling at: (i) $56; (ii) $50; (iii) $45? Assume that Intel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.) (i) Rate of return % (ii) Rate of return % (iii) Rate of return % b. If the maintenance margin is 25%, how high can Intel’s price rise before you get a margin call? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Margin call will be made at price $ or higher c. Redo parts (a) and (b), but now assume that Intel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" & "$" signs in your response.) (i) Rate of return % (ii) Rate of return % (iii) Rate of return % Margin call will be made at price $ or higher

Financial Management, Finance

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