Problem 1: Life is Short : Chris worked hard during the summer and managed to save $2,000, which he holds in T-bills. He wants to short some Apple stock, which is currently sold at $50 per share (assume that Apple does not distribute dividends, maybe an i-Tunes gift-card, if you're lucky..). The initial margin, which Chris fully exploits, is 50%, and the maintenance margin is 30%.
1. Which price would initiate a margin call?*
2. Chris has an upcoming tuition payment of $1,500, which he can't miss (he no money, other than this investment). What kind of order should Chris submit, and at which price, to make sure that he will have enough money to make the payment, and keep getting invaluable financial knowledge from FIN305?