P2.5 Jerri Kingston bought 1000 shares at $8 per share using a margin loan to finance 40%

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P2.5 Jerri Kingston bought 1000 shares at $8 per share using a margin loan to finance 40% of the purchase. Given the lender’s maximum loan to value ratio is 75%, how far does the share price have to drop before Jerri faces a margin call? (Assume there are no other securities forming part of the margin loan.)

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Fundamentals Of Investing

ISBN: 9781442532885

3rd Edition

Authors: Lawrence J. Gitman, Michael D. Joehnk, Scott Smart, Roger Juchau, Donald Ross, Sue Wright

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