Your client sold short 500 shares of ABC stock at $90 in his short margin account. BEFORE this transaction, the short market value of the existing positions in the account was $80,000 and the equity was $44,000. What is the credit balance in the account, after this transaction?

Explanations

Let's compute the CR balance PRIOR to the new transaction. (short market value) $80,000 + (equity) $44,000 = $124,000 CR. So, with the new transaction, the client sold 500 shares @ $90/share. This is $45,000 worth of SMV (short market value). Next, we take Reg T @ 50% and we have $22,500 that the client has to pay for the trade. This is the EQ. So, the SMV increases by $45,000 and EQ increases by $22,500, we can use SMV + EQ = CR. CR = $67,500. The CR BEFORE the trade was $124,000 and now it has increased by $67,500, the new CR balance is $191,500