Question

You purchased 200 shares of MSFT common stock on margin at $138.2 per share. Assume the initial margin is 45% and the maintenance margin is 33%. You will get a margin call if the stock drops below ________. (Assume the stock pays no dividends and ignore interest on the margin loan.)

Answer 1

You need to calculate the call price at which there would be a marigin call. You bought 200 shares at 138.2 havinf Initial margin 45%.

So you own capital would be 138.2 ( 1 - 0.45) = 76.01

Now you need to deposit 33% of maintainance margin additional to initial margin. So 76.01 is the 67% Value portion and to caculate the price of call. 76.01 / ( 1 - 0.33) = 113.45 approx.

So if your share value is above 113.45 you are safe and when 113.45 trggers you would receive all.

Direct Formula to calculate ths is