Question
Suppose that you just purchased 200 shares of Beta Bananas stock for $60 per share. The initial margin requirement is 70.0%, which means the amount
Suppose that you just purchased 200 shares of Beta Bananas stock for $60 per share. The initial margin requirement is 70.0%, which means the amount borrowed is $3,600. The corresponding balance sheet is below:
Assets | Liabilities and Equity | ||
---|---|---|---|
Stock | $ 12,000.00 | Loan from broker | $ 3,600.00 |
Equity | $ 8,400.00 | ||
Total assets | $ 12,000.00 | Total liabilities and equity | $ 12,000.00 |
Required:
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.)
b. Construct the balance sheet to show the current situation.
c. If the maintenance margin is 40%, at what stock price would you get a margin call? (Round your answer to 2 decimal places.)
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