Question
Asked Mar 6, 2020
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You’ve borrowed $20,000 on margin to buy shares in Ixnay, which is now selling at $40 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is
35%. Two days later, the stock price falls to $35 per share.
a. Will you receive a margin call?
b. How low can the price of Ixnay shares fall before you receive a margin call?

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Expert Answer

Step 1

a)

The person X might not receive a margin call. Person X hired out $20000 and with another $20000 of his own equity he subscribed 1000 shares of lxnay at $ 40 per share. At $35 per share, the market worth of stock is $35000, person X’s equity is $15000 and the percentage of margin is:

Finance homework question answer, step 1, image 1

Person X’s margin percentage is more than the mandatory...

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