A trader has purchased 200 shares of a stock at £100 per share on margin. The terms of the loan obtained from the trader's broker are as follows. The initial margin is 50%, the interest rate on the loan is 8%, and the trader has agreed to maintain a margin of 20%. How low the price can drop in a year before the trader receives a margin call? F
A trader has purchased 200 shares of a stock at £100 per share on margin. The terms of the loan obtained from the trader's broker are as follows. The initial margin is 50%, the interest rate on the loan is 8%, and the trader has agreed to maintain a margin of 20%. How low the price can drop in a year before the trader receives a margin call? F
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
Section: Chapter Questions
Problem 1PS
Question
![A trader has purchased 200 shares of a stock at £100
per share on margin. The terms of the loan obtained
from the trader's broker are as follows. The initial
margin is 50%, the interest rate on the loan is 8%, and
the trader has agreed to maintain a margin of 20%.
How low the price can drop in a year before the trader
receives a margin call?
F](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e62f829-97f5-4027-967d-1c246f8764f7%2F4af7fdfa-f832-4e29-9b1f-c8911b0ada5e%2Fpv45uar_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A trader has purchased 200 shares of a stock at £100
per share on margin. The terms of the loan obtained
from the trader's broker are as follows. The initial
margin is 50%, the interest rate on the loan is 8%, and
the trader has agreed to maintain a margin of 20%.
How low the price can drop in a year before the trader
receives a margin call?
F
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