Question

Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. (LO 3-4)

a. What is the margin in Dée’s account when she first purchases the stock?

b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account?

c. If the maintenance margin requirement is 30%, will she receive a margin call?

d. What is the rate of return on her investment?

Answer 1