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Bubba sells short 100 XYZ at $60 and makes the required Regulation T deposit of 50%. XYZ then rises I price to $65.
At this point what is the credit balance?
Suggested Answer: B
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deductions from gross income to offset lower value of equipment. Depreciation is the deduction of costs for capital assets as their value declines.
28 comments · newest first
CO
Cordell
11 months ago
Yeah, but if it keeps rising, that could get risky!
SH
Shenika
11 months ago
Just to clarify, the initial deposit was $3,000, right?
MA
Matilda
12 months ago
Wait, how does that add up? I'm confused.
TA
Tatum
12 months ago
Totally agree, $3,500 makes sense!
JO
Josephine
1 year ago
The credit balance is $3,500 after the price rise.
TE
Teddy
1 year ago
I feel like I’ve seen a question like this before. The credit balance should be the short sale amount plus the margin, but I’m not entirely confident about the calculations with the price going up.
AM
Amie
1 year ago
If I remember correctly, the credit balance should include the initial deposit and the proceeds from the short sale. But I'm a bit confused about how the price change affects it.
FE
Felicidad
1 year ago
I think the credit balance is based on the short sale proceeds minus the current market value of the shares. I practiced a similar question, but I can't recall the exact numbers.
GI
Gilma
1 year ago
I remember that when you short sell, you have to consider the initial margin and the current price. But I'm not sure how to calculate the credit balance after the price increase.
YO
Yolande
1 year ago
Hmm, I'm not totally sure how to approach this. I know short selling involves borrowing shares and then buying them back at a lower price, but I'm not clear on the specifics of the Regulation T deposit. I'll need to think this through carefully.
MA
Mary
1 year ago
Easy peasy! Bubba made $5 per share on the short sale, so his total gain is $500. With the 50% Regulation T deposit, the credit balance is $2,500. I'm confident this is the right answer.
LO
Lottie
1 year ago
I'm a little confused on the Regulation T deposit part. Does that factor into the credit balance calculation? I'll need to review that concept before answering.
IV
Ivette
1 year ago
Okay, I think I've got this. Bubba sold 100 shares short at $60, so his initial position was -$6,000. Then the price went up to $65, so his new position is -$6,500. The required Regulation T deposit is 50%, so the credit balance should be $3,500.
GL
Glory
1 year ago
Hmm, this looks like a tricky short selling question. I'll need to carefully walk through the calculations to get the right answer.
BR
Brock
2 years ago
I wonder if Bubba's gonna treat himself to a nice steak dinner with his credit balance. Maybe even a little dessert, too!
TO
Torie
1 year ago
User 3: He could definitely afford dessert too with that credit balance.
TE
Teri
1 year ago
User 2: That's a nice chunk of change for a steak dinner!
UL
Ulysses
1 year ago
User 1: Bubba's credit balance is $3,500.
AA
Aaron
2 years ago
Alright, let's see... If Bubba shorted 100 shares at $60 and they rose to $65, that's gotta be at least $3,500. Gotta love those gains!
HO
Hoa
2 years ago
Hmm, $2,500 seems a bit low. I think Bubba's got a little more in the bank than that.
GL
Glory
1 year ago
D) $9,000
KA
Karon
1 year ago
C) $6,000
KA
Kati
1 year ago
B) $3,500
GO
Goldie
1 year ago
A) $2,500
JU
Julian
2 years ago
Woah, I'm really sweating this one. Gotta make sure I don't short-change myself on the credit balance!
AL
Alpha
2 years ago
I'm not sure, but based on the scenario, it seems like the credit balance should indeed be $3,500.
HA
Hana
2 years ago
I agree with Loise, because Bubba sold short 100 XYZ at $60 and made a 50% deposit, so the credit balance should be $3,500.
LO
Loise
2 years ago
I think the credit balance is $3,500.