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Suppose that you just purchased 100 shares of Beta Bananas stock for $40 per share. The initial margin requirement is 70.0%, which means the amount
Suppose that you just purchased 100 shares of Beta Bananas stock for $40 per share. The initial margin requirement is 70.0%, which means the amount borrowed is $1,200. The corresponding balance sheet is below:
Assets | Liabilities and Equity | ||
---|---|---|---|
Stock | $ 4,000.00 | Loan from broker | $ 1,200.00 |
Equity | $ 2,800.00 | ||
Total assets | $ 4,000.00 | Total liabilities and equity | $ 4,000.00 |
Required:
a. Now suppose the price of the stock falls to $29 per share. What is your current margin percentage? (Round your answer to 2 decimal places.)
b. If the maintenance margin is 35%, at what stock price would you get a margin call? (Round your answer to 2 decimal places.)
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