You are concerned about the market volatility but have found stocks that are attractively priced. In addition to cash,

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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 13.95% 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 $216,480 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 1.42, while the
SHORT side has a weighted average beta of 1.00. How much cash
will you have in your account immediately after you set up the
portfolio? Consider cash from all sources regardless of the
purpose.
Question 8 options:
$349,162
$358,115
$367,068
$376,021
$384,974