Answer:
$45.54
Explanation:
Given that,
Stock of Flop Industries is trading at $37
Initial margin = 60 percent (short 400 shares sale)
Maintenance margin = 30 percent
Amount received from short sale:
= shares short × Stock trading price
= 400 × $37
= $14,800
Initial deposit:
= Amount received from short sale × Initial margin
= $14,800 × 60%
= $8,880
Account value = Amount received from short sale + Initial deposit
= $14,800 + $8,880
= $23,680
Margin call price:
= Account value ÷ [short sale + (short shares sale × maintenance margin)]
= $23,680 ÷ [400 + (400 × 30%)]
= $23,680 ÷ (400 + 120)
= $23,680 ÷ 520
= $45.54
