Margin Call Assignment | Homework For You

16. Amy Brookheimer has been working as a staffer for one of the presidential candidates. Despite her campaign experience and political knowledge, she is astounded and confused at the current political climate, so she’s rather pessimistic. Amy decides to sell short 200 shares of JPMorgan (JPM) using the maximum allowable margin in accordance with Federal Reserve Board Regulation T. You see JPM is currently trading at $40 per share.Homework For You

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a) Explain very concisely how Amy would short JPM, including how much money she must contribute as collateral?

b) If the maintenance margin is 25%, at what price will Amy receive a margin call?

c) If Amy earns no interest on the funds in her margin account, and JPM pays a dividend of $1.25, what will her rate of return be after one year if GD is selling at $35 per share? Get Finance homework help today

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