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PART 2 - Buying Stock on Margin (12 Marks) Background *MARGIN ACCOUNTS-A margin account is a type of investment account whic allows you to borrow
PART 2 - Buying Stock on Margin (12 Marks) Background *MARGIN ACCOUNTS-A margin account is a type of investment account whic allows you to borrow money from your Broker to pay for new purchase for tr account. In such cases, the client pays only a portion of the purchase price ar the investment dealer lends the balance of the purchase price to the client. Interest is charged on the loan. "NOTE: The word MARGIN refers to the amount of funds the investor must personally provide. The broker lends the remainder to the investor. The maximum loan from the broker is up to 50% of the current market value o the borrowed shares. As the current value of the shares changes each day, so does the maximum loa amount: Question-Determining the Amount of the Margin Call REQUIRED: (4 Marks) What is the amount of the margin call to the client? (Remember, the margin call is the additional money that the client must deposit to his account)
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