anyone can provide solution ??? CSC Exam 1 level question

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celebrity

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Can anyone provide solution for these questions. ANSWER: Q.46 answer is A, Q.47 answer is D.

46. An investor short-sells 700 shares of IOE Incorporated, a security which is eligible for reduced margin, at $22. It closes the day at $24. What is the additional margin required?
a) $ 6,440
b) $ 9,360
c) $14,270
d) $20,600

47. One week later, IOE is $19 and the investor offsets her position. What is her profit or loss?
a) $2,100 loss
b) $ 700 loss
c) $ 700 profit
d) $2,100 profit
 
celebrity said:
Can anyone provide solution for these questions. ANSWER: Q.46 answer is A, Q.47 answer is D.

46. An investor short-sells 700 shares of IOE Incorporated, a security which is eligible for reduced margin, at $22. It closes the day at $24. What is the additional margin required?
a) $ 6,440
b) $ 9,360
c) $14,270
d) $20,600

47. One week later, IOE is $19 and the investor offsets her position. What is her profit or loss?
a) $2,100 loss
b) $ 700 loss
c) $ 700 profit
d) $2,100 profit
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Please show us what you have tried and exactly where you are stuck.

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I have tried and erased it on my white board actually. I am helpless now. If Anyone can help me so it will be great
 
Subhotosh Khan said:
Please show us what you have tried and exactly where you are stuck.

Please follow the rules of posting in this forum, as enunciated at:


Please share your work/thoughts about this problem.
Click to expand...
I have tried and erased it on my white board actually. I am helpless now. If Anyone can help me so it will be great
 
celebrity said:
I have tried and erased it on my white board actually. I am helpless now. If Anyone can help me so it will be great
Click to expand...
Reproduce what you erased or try something new. No one here is going to solve your problem for you. This is a help forum where we expect you to solve your own problem with help from the forum's helpers. Read the posting guides and reply with a post that follows those guidelines
 
This question is about the technical details on what are the rules in Canadian securities markets.

I have no idea what those rules are even in the US; they change over time and are quite technical.

I can explain the basic ideas, but not answer the actual questions.

In a “short sale” of shares of stock, you sell shares that your broker has borrowed from someone, and the broker holds on to the proceeds. The broker must be able to return the same number of shares (not the same shares) upon demand. Consequently, the broker requires that the seller put up some money in addition to the sales proceeds so that if the price of those shares goes up, the broker has enough money to purchase the required shares. The amount that the seller give the broker is the “margin.” It is expressed as a percentage in the US and is regulated. If the price of the shares does go up materially, the broker asks for more money in a “margin call.”

A short seller makes money if the seller later buys the stock at a lower price than it was previously sold for. In other words, profit comes from buying low and selling high. The major differences between a short sale and a long buy are (1) in a long buy, the purchase precedes the sale in time whereas in a short sale, the sale precedes the purchase in time, (2) a long buy is a bet that the price will rise in the future, and a short sale is a bet that the price will fall in the future, and (3) the potential loss from a short sale is unlimited whereas the potential loss on a long buy is the amount of the purchase price.

In the words of the old Wall Street aphorism,

He who sells what isn’t hisen
Must buy it back
Or go to prison
 
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