Los 39.e

Question 1

What is a long position?

Answer 1

A investor who owns an asset, or has the right or obligation under a contract to hold the asset

Question 2

What is a short position

Answer 2

Result from borrowing an asset and selling it, with the obligation to replace te asset in the future

Question 3

What is a short sell

Answer 3

(1) simultaneously borrows and sells securities through a broker, (2) must return the securities at the request of the lender or when the short sale is closed out, and (3) must keep a portion of the proceeds of the short sale on deposit with the broker.

Question 4

What are payment-in-lieu

Answer 4

The short seller must pay all dividends or interest that the lender would have received from the security that has been loaned to the short seller

Question 5

What is the short rebate rate

Answer 5

The short seller must also deposit the proceeds of the short sale as collateral to guarantee the eventual repurchase of the security. The broker then earns interest on these funds and may return a portion of this interest to the short seller

Question 6

What is a leverage position?

Answer 6

Using borrowed funds to purchase an asset

Question 7

What does buying on margin mean?

Answer 7

Using leverage to buy securities, and borrowed funds are called the marin loan, the interest rate is called the Call Money Rate

Question 8

What is the Initial Margin Requirement

Answer 8

Minimum amount of equity that investors are required to put up at the time of a new margin purchase.

Question 9

How do you workout leverage ratio

Answer 9

Value of asset / Value of Equity Possition
Value of asset

Question 10

How do you workout margin call price

Answer 10

(1-initial margin / 1-maintainance margin)