Assume You Sold Short 100 Shares of Common Stock at $40

question 48

Multiple Choice

Assume you sold short 100 shares of common stock at $40 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $50?

• A) 40%
• B) 20%
• C) 35%
• D) 25%

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Definitions:

Safety Inventory

Extra stock kept on hand to guard against uncertainty in demand or supply and prevent stockouts.

Uncertain Demand

Refers to situations where future customer demand for a product or service is unclear or difficult to predict.

Losing Sales

The phenomenon of experiencing a decrease in the number of sales transactions or revenue, often as a result of competition, market shifts, or other external factors.

Seasonal Inventory

Goods or materials stocked in anticipation of seasonal demand variations.