Assume an initial margin requirement of 50% anda maintenance margin of 30%. An investor buys100 shares of stock on margin at $60 per share. Theprice of the stock subsequently drops to $50.a. What is the actual margin at $50?b. If the price declines to $49, is there a margincall?c. Assume that the price declines to $45. What isthe amount of the margin call? At $35?

Answered: Assume an initial margin requirement of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 19P

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Assume an initial margin requirement of 50% and a maintenance margin of 30%. An investor buys 100 shares of stock on margin at $60 per share. The price of the stock subsequently drops to $50. a. What is the actual margin at $50? b. If the price declines to $49, is there a margin call? c. Assume that the price declines to $45. What is the amount of the margin call? At $35?
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Assume an initial margin requirement of 50% and a maintenance margin of 30%. An investor buys 100 shares of stock on margin at $60 per share. Th price of the stock subsequently drops to $50. a. What is the actual margin at $50?