Lauren has a margin account and deposits R50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at R35 per share. a. How many shares can Lauren purchase using the maximum allowable margin? b. What is Lauren’s profit (loss) if the price of Gentry’s stock i. rises to R45? ii. falls to R25? c. If the maintenance margin is 30 percent, to what price can Gentry Wine fall before Lauren will receive a margin call?

Lauren has a margin account and deposits R50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at R35 per share. a. How many shares can Lauren purchase using the maximum allowable margin? b. What is Lauren’s profit (loss) if the price of Gentry’s stock i. rises to R45? ii. falls to R25? c. If the maintenance margin is 30 percent, to what price can Gentry Wine fall before Lauren will receive a margin call?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 2P

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Lauren has a margin account and deposits R50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at R35 per share. a. How many shares can Lauren purchase using the maximum allowable margin? b. What is Lauren’s profit (loss) if the price of Gentry’s stock i. rises to R45? ii. falls to R25? c. If the maintenance margin is 30 percent, to what price can Gentry Wine fall before Lauren will receive a margin call? Ko
Lauren has a margin account and deposits R50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at R35 per share. a. What is Lauren’s profit (loss) if the price of Gentry’s stock i. rises to R45? ii. falls to R25?
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