# You have borrowed \$45,000 on margin to buy shares in Tencent, which is now selling at \$120 per share.  Your account starts at the initial margin requirement of 50%.  The maintenance margin is 30%.  Two days later, the stock price falls to \$105 per share.a. What is the current margin and will you recieve a margin call?b. How low can the price of the shares fall before you recieve a margin call?

Question

You have borrowed \$45,000 on margin to buy shares in Tencent, which is now selling at \$120 per share.  Your account starts at the initial margin requirement of 50%.  The maintenance margin is 30%.  Two days later, the stock price falls to \$105 per share.

a. What is the current margin and will you recieve a margin call?

b. How low can the price of the shares fall before you recieve a margin call?

Step 1

a.

Calculation of Current Margin:

The current margin is 42.86%.

Step 2

Excel Workings:

Step 3

From the results obtained above, the maintenance margin is 30% and the current margin of 42.86% is higher than the maintenance margin.

...

### Want to see the full answer?

See Solution

#### Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in