Question

You purchase 100 shares of a stock at $120 per share, on a
margin of 55 percent**.**

**The stock declines to $90**.

a.What is your initial margin position (equity and loan)?

b.When the price declines to $90 per share will you be called upon to put up more margin to meet the 35 percent minimum maintenance margin requirement?

If yes, how much equity would you need to add to your account?

If no, how much equity do you have over the minimum required?

c. What is your rate of return (loss)?

d. Determine the price that will trigger a margin call.

Answer #1

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