Question: The stock price of Tesla is $658. Your broker charges a rate of 0.7%...
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Question: The stock price of Tesla is $658. Your broker charges a rate of 0.7% on borrowed shares.
1. You think the stock price will go down soon, and want to short 61 shares. If the initial margin is 50%, what is the minimum additional dollar amount that you have to deposit from your own funds to your brokerage account?
Answer: Short-selling 61 shares gives us some cash, which must be kept in the brokerage account: Proceeds from short-selling = Number of shares * Stock price = 61 * 658 = 40,138 With an initial margin requirement of 50%, we have to add 50% of the proceeds from short-selling in the form of additional cash to the account: Extra cash = 50% * 40,138 = 20,069
2. Three months later, the stock price is $688. Tesla paid a dividend of $9 per share during the three months you were short. What is your percentage margin (entered as a decimal number) at the end of three months?
Can you please help me with question 2? Thank you!
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