Question
An investor opened a margin account at Faida Financial Securities Limited. The investor began trading in securities by purchasing 400 shares of XYZ Ltd. on
An investor opened a margin account at Faida Financial Securities Limited. The investor began trading in securities by purchasing 400 shares of XYZ Ltd. on margin at Sh.80 per share. In order to complete this purchase, the investor borrowed Sh.6,000 from the broker. Required: () The actual margin in the investor's account at the time of the purchase. (3 marks) (2 marks) The actual margin in the investor's account if the share price increases to Sh.120 per share. (2 marks) (iii) The actual margin in the investor's account if the share price decreases to Sh.70 per share. (iv) Using the results obtained in (d) (i) above and a maintenance margin of 50%, determine the share price required for the investor to receive a margin call. (2 marks) (Total: 20 marks)
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