Question
At the beginning of the day, you purchased 500 shares of stock for $36.00 a share using your margin account. The initial margin requirement is
At the beginning of the day, you purchased 500 shares of stock for $36.00 a share using your margin account. The initial margin requirement is 0.60. Unless otherwise stated, assume that for purchasing the shares your borrowed amount is the maximum allowed borrowing. At the end of the day, the closing price of stock was $22.50 a share, and you received a margin call. Suppose that, you took care of that margin call by bringing some additional funds and keeping them as security deposit. Then, what is the dollar amount of those additional funds? You are also given that, once you took care of the margin call, your margin balance is equal to the initial margin level. Please remember that the margin balance is the ratio of account equity to the value of risky investments. Cross-check: Prepare the balance sheet at the end of the day, after you have taken care of the margin call.
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