You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35%?

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When you sell short, the initial transaction involves selling shares you do not own, with the intention of buying them back later at a lower price. The initial margin requirement of 50% means you must have half the value of the short sale in your account. In this case, you sold 100 shares at $45 each, so the total value is $4,500, and the initial margin is $2,250 (50% of $4,500). The maintenance margin is the minimum amount of equity that must be maintained in the margin account, which in this case is 35%. To find the stock price at which you'd receive a margin call, you can use the formula for the value of the equity in the account after a price change, which must stay above 35% of the value of the shares at the new price. The formula for the equity in a short sale account after a price increase is: Initial Margin + (Initial Price - New Price) * Number of Shares. Set this equal to 35% of (New Price * Number of Shares), solve for the New Price, and you find that a margin call would occur if the stock price rises to $50.

You Sold Short 100 Shares of Common Stock at $45