Question
Please show me the detail instructions of these question. The current initial margin requirement set by Fed is 50%. Suppose the maintenance margin set by
Please show me the detail instructions of these question.
The current initial margin requirement set by Fed is 50%. Suppose the maintenance margin
set by the broker is 40%.
Suppose that an investor pays $5,500 towards the purchase of $10,000 worth of stock (200
shares at $50 per share), borrowing the remaining $4,500 from the broker.
(1) Calculate the initial margin. Is the initial margin requirement met?
(2) Suppose that the stock price declines to $40 per share. What is the new margin? Will
this price drop initiate a margin call and why?
(3) Suppose that the stock price declines to $35 per share. What is the new margin? Will
this price drop initiate a margin call and why?
(4) How far could the stock price fall before the investor would get a margin call?
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