Asked by Andrea Madison on May 09, 2024
Verified
You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $27? (Ignore any dividends.)
A) 10%
B) 20%
C) 6.67%
D) 15%
Short Sale
This is a trading or investment strategy where an investor sells a security they do not own, expecting its price to decline.
Margin Required
The minimum amount of funds that must be deposited with a broker when borrowing to buy securities or entering into a futures contract, serving as collateral.
- Determine the return rate for investments facilitated by margin trading.
Verified Answer
MJ
= 20%
Learning Objectives
- Determine the return rate for investments facilitated by margin trading.