Question
Suppose that you just purchased 150 shares of Beta Bananas stock for $50 per share. The initial margin requirement is 65.5%, which means the amount
Suppose that you just purchased 150 shares of Beta Bananas stock for $50 per share. The initial margin requirement is 65.5%, which means the amount borrowed is $2,588. The corresponding balance sheet is below:
Assets | Liabilities and Equity | |||
Stock | $7,500.00 | Loan from broker | $2,587.50 | |
Equity | $4,912.50 | |||
Total assets | 7,500.00 | Total liabilities and equity | $7,500.00 | |
a. Now suppose the price of the stock falls to $37 per share. What is your current margin percentage? (Round your answer to 2 decimal places.)
Margin percentage (answer) %
b. Construct the balance sheet to show the current situation.
Assets | Liabilities and Equity | |||
Stock | $ (answer) | Loan from broker | $ (answer) | |
Equity | $ (answer) | |||
Total assets | $ (answer) | Total liabilities and equity | $ (answer) | |
c. If the maintenance margin is 45%, what is the highest stock price that will trigger a margin call? (Round your answer to 2 decimal places.)
Price $ (answer)
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