You sell short 100 shares of the ERT stock at $60 per share. Assume your broker requires an initial margin of 50% and a maintenance margin of 25%. If the stock price increases to $80, how much money do you have to add to your account to restore the maintenance margin of 25%?
a. $1,100
b. $950
c. $875
d. $1,000
2. Suppose that on Monday, 7 July, you assume a short position in one December British pound futures contract at the futures price of $1.12/£. The initial margin is $2,000, and the maintenance margin is $1,500. The contract size is £125,000. Assume you do not withdraw excess money from your margin balance. All margin requirements are met with cash. The settlement prices for Monday and the next two days are shown in the following:
Monday: $1.10
Tuesday: $1.09
Wednesday: $1.06
What is the balance in your margin account at the end of Wednesday?
a. $8,950
b. $5,250
c. $9,500
d. $1,500
e. $7,750