Question

You purchase 150 shares of a stock, 50% margin with the following: Bid is $22 and...

You purchase 150 shares of a stock, 50% margin with the following:

Bid is $22 and Ask is $24.

The broker's maintenance margin is set at 30%.

What is the loan amount?

a) 1800

b) 2000

c) 1650

d) None of the above

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Answer #1

Given Information:

No of shares = 150, Initial margin 50%, Spread= Bid 22,Ask 24

Bid rate is the rate at which buyer is willing to buy from the market and Ask rate is the rate at which Seller is willing to Sell.

Since you are buyer you need person who is willing to sell the stock in market so ask rate is the rate at which you would buy the share.

Total Purchase price = 150 x 24 = 3600

Broker is providing 50% margin.

So Loan amount = 3600 x 0.50 = 1800

option A is correct

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