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30 July, 17:36

You decide to sell short 50 shares of Ford at $10 per share. The initial margin requirement is 50%. The maintenance margin is 40%. What is the minimum amount of cash that must be put into the brokerage account?

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  1. 30 July, 21:18
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    Answer: $250

    Explanation:

    Given,

    Short sale = 50shares

    Current market price = $10 per share

    Initial Margin requirement = 50%

    Maintenance margin requirement (MMR) = 40%

    Total short sales proceeds = 50 x $10=$500

    Since the initial margin requirement is 50% which is equal to 50% of $500 or $250. Therefore, $250 worth of stock or cash has to be deposited as the initial margin requirement.

    Account value = Short sales proceeds + Initial Margin = $500 + $250 = $750
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