P-1 An investor buys 100 shares of Altria at $82 per share on margin. The initial margin requirement is 50 percent, and the maintenance margin is 30 percent. a. The price of Altria drops to $61 per share. What is the actual margin now? b. The price of Altria declines further to $59.50. Show why a margin cal is generated, or is not warranted. c. The price declines yet again to $55.25. Show by calculations why a margin call is generated.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
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P-1 An investor buys 100 shares of Altria at $82 per share on margin. The initial margin
requirement is 50 percent, and the maintenance margin is 30 percent.
a. The price of Altria drops to $61 per share. What is the actual margin now?
b. The price of Altria declines further to $59.50. Show why a margin cal is generated, or is
not warranted.
c. The price declines yet again to $55.25. Show by calculations why a margin call is
generated.
Transcribed Image Text:P-1 An investor buys 100 shares of Altria at $82 per share on margin. The initial margin requirement is 50 percent, and the maintenance margin is 30 percent. a. The price of Altria drops to $61 per share. What is the actual margin now? b. The price of Altria declines further to $59.50. Show why a margin cal is generated, or is not warranted. c. The price declines yet again to $55.25. Show by calculations why a margin call is generated.
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