You are concerned about the market volatility but have found stocks that are attractively priced. In addition to cash, your portfolio will have securities both on the LONG and SHORT sides. You want to set up your LONG/SHORT portfolio with some constraints. You will set aside 12.27% of the equity as a cash reserve to cushion any adverse margin changes and to pay any associated fees. You will maximize your buying and selling power (i.e. what you can purchase and sell on margin) using the remaining equity and loans from the broker. Your account's beginning equity is $201,290 all in cash before you start trading. You will set up your 100% beta-neutral trade on full margin, and the margin requirements are 50% on both sides. Assume that the LONG side has a weighted average beta of 1.35, while the SHORT side has a weighted average beta of 1.00. What is the value of your account's total liabilities immediately after you set up the portfolio? O $250,234 $257,185 $264,136 $271,087 $278,038

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You are concerned about the market volatility but have found stocks that are
attractively priced. In additionto cash, your portfolio will have securities both on the
LONG and SHORT sides. You want to set up your LONG/SHORT portfolio with
some constraints. You will set aside 12.27% of the equity as a cash reserve to
cushion any adverse margin changes and to pay any associated fees. You will
maximize your buying and selling power (i.e. what you can purchase and sell on
margin) using the remaining equity and loans from the broker. Your account's
beginning equity is $201,290 all in cash before you start trading. You will set up your
100% beta-neutral trade on full margin, and the margin requirements are 50% on
both sides. Assume that the LONG side has a weighted average beta of 1.35, while
the SHORT side has a weighted average beta of 1.00. What is the value of your
account's total liabilities immediately after you set up the portfolio?
O $250,234
$257,185
$264,136
$271,087
$278,038
Transcribed Image Text:You are concerned about the market volatility but have found stocks that are attractively priced. In additionto cash, your portfolio will have securities both on the LONG and SHORT sides. You want to set up your LONG/SHORT portfolio with some constraints. You will set aside 12.27% of the equity as a cash reserve to cushion any adverse margin changes and to pay any associated fees. You will maximize your buying and selling power (i.e. what you can purchase and sell on margin) using the remaining equity and loans from the broker. Your account's beginning equity is $201,290 all in cash before you start trading. You will set up your 100% beta-neutral trade on full margin, and the margin requirements are 50% on both sides. Assume that the LONG side has a weighted average beta of 1.35, while the SHORT side has a weighted average beta of 1.00. What is the value of your account's total liabilities immediately after you set up the portfolio? O $250,234 $257,185 $264,136 $271,087 $278,038
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