Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that you just purchased 250 shares of Beta Banana's stock for $70 per share. The initial margin requirement is 76.5%, which means the amount

image text in transcribed

Suppose that you just purchased 250 shares of Beta Banana's stock for $70 per share. The initial margin requirement is 76.5%, which means the amount borrowed is $4,112. The corresponding balance sheet is below: Assets Liabilities and Equity Stock $17,500.00 Loan from broker $4,112.50 $13,387.50 $17,500.00 Total assets 1754- Equity 17500.00 Total liabilities and equity a. Now suppose the price of the stock falls to $45 per share. What is your current margin percentage? (Round your answer to 2 decimal places.) Margin percentage % b. Construct the balance sheet to show the current situation. Assets Liabilities and Equity Stock Loan from broker Equity Total liabilities and equity Total assets c. If the maintenance margin is 50%, what is the highest stock price that will trigger a margin call? (Round your answer to 2 decimal places.) Price

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Winning The Losers Game Timeless Strategies For Successful Investing

Authors: Charles D. Ellis

7th Edition

1259838048,1259838056

More Books

Students also viewed these Finance questions

Question

Solve for x: 2(3x 1)2(x + 5) = 12

Answered: 1 week ago