Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The current market price for XYZ is $177 per share. Initial margin is 50%, maintenance margin is 35% and margin interest is 1.75% per year.

The current market price for XYZ is $177 per share. Initial margin is 50%, maintenance margin is 35% and margin interest is 1.75% per year. XYZ pays annual cash dividends of $5.95 per share. You believe the stock price will increase over the next year and wish to trade long using margin. At what price would you receive a margin call? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Step by Step Solution

3.49 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

To calculate the price at which a margin call would occur we need to use the following formula Margi... 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

Financial Accounting and Reporting

Authors: Barry Elliott, Jamie Elliott

14th Edition

978-0273744535, 273744445, 273744534, 978-0273744443

More Books

Students also viewed these Accounting questions

Question

What are the components of goal-setting theory?

Answered: 1 week ago

Question

ii. Tenacity Study?

Answered: 1 week ago