Lets assume, you have a margin account and you have deposited $50,000 into it. Currently, the initial margin requirement is 40 percent. Your allocated stock is currently selling at $35 per share.

a. How many shares can you purchase using the maximum allowable margin?

b. What is your profit (loss) if the price of your allocated stock rises to $45 and you decide to sell the stock?

c. Recalculate the profit (loss) if your allocated stock price falls to $25 and you sell your stock?

d. If the maintenance margin is 30 percent, to what price can your stock fall before you will receive a margin call?

e. Briefly discuss the significance of maintenance margin and margin call in trading.