Question
You have a margin account and you deposited $30,000 in that account. Initial margin on your account is 40% and maintenance margin is 20%. You
You have a margin account and you deposited $30,000 in that account. Initial margin on your account is 40% and maintenance margin is 20%. You purchase shares of Swift Corporation, currently selling at $15 per share and take maximum leverage. Ignoring commission and interest answer the following questions: a. What is the amount of loan in this transaction? (5 points) b. How many share you will purchase? (5 points) c. If share prices increases to $17 per share, what will be your profit (loss) in dollars and in percentage. (10 points) d. If share prices decreases to $12 per share, what will be your profit (loss) in dollars and in percentage. (10 points) e. At what price margin call will be issued? (5 points) f. If share prices go to $9 per share, what will be the amount of margin call? (5 points)
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