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%**.

**Excel Spreadsheet:**

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.

**...**

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