When buying assets, Rhino hedge fund, like many others, prefers to invest as little of their own capital as possible. This means that when they buy assets, they buy them on margin if they can. Just as is the case when you short stocks, when you buy them on margin the most you can borrow is 50% of the value of the stock, which of course means that you must contribute margin (your equity) of at least 50% of the value of what you are buying. There is also a 25% maintenance margin requirement for long (buy) positions.

If they purchased 1,000 shares of UVW stock on margin at $37.25 and the price subsequently moved to $42 per share, by what percentage would the equity in the trade increase?

10.7%

25.5%

12.0%

29.7%