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I don't quite understand how they came to the answer. Can someone please explain the steps in more depth? Given a maintenance margin of 30
I don't quite understand how they came to the answer. Can someone please explain the steps in more depth?
Given a maintenance margin of 30 per cent, when you buy on margin you must consider how far the share price can fall before you receive a margin call. The computation for our example is as follows. If the price of the share is P and you own 200 shares, the value of your position is 200P and the equity in your account is (200P$5000). The percentage margin is (200P5000)/200P. To determine the price, P, that is equal to 30 per cent (0.30), we use the following equation: 200P200P5000200P$5000140PP=0.30=60P=$5000=$35.71
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