A margin account requires an initial margin of 50% and a margin call will occur if the stock price depreciates to $13.33. If stocks were initially purchased at $20, the maintenance margin is closest to: O A. 50% О В. 67% Ос. 25%

A margin account requires an initial margin of 50% and a margin call will occur if the stock price depreciates to $13.33. If stocks were initially purchased at $20, the maintenance margin is closest to: O A. 50% О В. 67% Ос. 25%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 8P: A stock is trading at $80 per share. The stock is expected to have a yearend dividend of $4 per...

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

A margin account requires an initial margin of 50% and a margin call will occur if the stock price depreciates to $13.33. If stocks were initially purchased at $20, the
maintenance margin is closest to:
O A. 50%
O B. 67%
O c. 25%

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