Part 1

What's the minimum amount of money you must contribute to the account to satisfy the initial margin requirement?

Correct

Assets		Liabilities & Equity
Sale proceeds (N*P0)	52,321	Value of shares borrowed (N*P)	52,321
Cash	31,392	Equity	31,392
Total	83,713	Total	83,713

We borrow 540 shares and sell them immediately. The value of the shares shows up as both an asset (since we got cash from selling the shares) and a liability (since we owe these shares): Sale proceeds = Value of shares borrowed = N * P₀ = 540 * 96.89 = 52,321

Since the initial margin is 60%, we have to contribute at least 60% of this amount to the account in the form of additional cash. Assuming that we contribute as little as possible, we contribute the minimum:

Contribution = 0.6 * 52,321 = 31,392 This is also the initial dollar margin (or equity) in the account.

Attempt 1/3 for 10 pts.

Part 2

If the broker's maintenance margin is 30%, what is the maximum value the stock price can take before you are issued a margin call?