Question
Toby purchased common shares of two companies on margin. The first share, ABC, is eligible for a initial margin of 60% and is presently trading
Toby purchased common shares of two companies on margin. The first share, ABC, is eligible for a initial margin of 60% and is presently trading for $117.35. The second share, DEF, is trading at $27.15 and has an initial margin of 50%. Your overall maintenance margin is 45%, meaning, at any time, the total value of your two stock portfolio must meet the 45% margin. (a) In dollar amounts, how much is the total margin requirement if Toby purchased 200 shares of ABC and 3000 shares of DEF? (b) If the price of ABC falls immediately to $103.25 and that of DEF falls to $23.45, how much (if any) will be the required deposit in his margin account? (c) If price of DEF remained at $27.15, what price of ABC would trigger the margin call?
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