Series 7 - General Securities Representative Exam

Preview Mode

Your client has sold $80,000 worth of ABC stock short. He sold 1,000 shares of ABC at $80 per share. He deposited $40,000 in cash to initiate the position. How high can the share price of ABC go before your client is required to deposit more funds to maintain the position?

$81.00
A
$92.31
B
$85.01
C
$94.45
D

Explanations

This is the important formula CR / 1.3. Credit balance divided by 1.3. The credit balance is $120,000. Divided by 1.3, we have $92,307.69. $92,307.69 divided by 1000 shares, we have $92.31 per share. If the stock rises beyond $92.31, the client will have to deposit more funds to maintain the position. CR/1.3

Pricing