Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A trader opened a margin account 3 months ago, just meeting the 20% initial margin requirement. Since then, the stock has fallen 15% while the

  1. A trader opened a margin account 3 months ago, just meeting the 20% initial margin requirement. Since then, the stock has fallen 15% while the loan has increased by 3%. If the maintenance margin is 10% and when a call happens the account holder must return to at least the maintenance margin, then what would happen now?

A.Cannot be determined as the dollar value of the position was not given

B.He must meet a margin call equal to ~6.6% of the original value

C.He must meet a margin call equal to 15% of the original value

D.He must meet a margin call equal to 18% of the original value

E.There is no margin call, so nothing happens

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Stochastic Filtering With Applications In Finance

Authors: Bhar Ramaprasad

1st Edition

9814304859, 9789814304856

More Books

Students also viewed these Finance questions

Question

LO1 Understand risk management and identify its components.

Answered: 1 week ago