Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

you have a margin account and you have deposited $50,000 into it. Currently, the initial margin requirement is 40 percent. Your allocated stock is currently

you have a margin account and you have deposited $50,000 into it. Currently, the initial margin requirement is 40 percent. Your allocated stock is currently selling at $35 per share. a. How many shares can you purchase using the maximum allowable margin? b. What is your profit (loss) if the price of your allocated stock rises to $45 and you decide to sell the stock? c. Recalculate the profit (loss) if your allocated stock price falls to $25 and you sell your stock? d. If the maintenance margin is 30 percent, to what price can your stock fall before you will receive a margin call? e. Briefly discuss the significance of maintenance margin and margin call in trading. Note: Ignore interest and commissions. Show your calculation and answers in the answer box provided in the template.

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

Personal Finance

Authors: Thomas Garman, Raymond Forgue

12th edition

9781305176409, 1133595839, 1305176405, 978-1133595830

More Books

Students also viewed these Finance questions

Question

=+ a. A change in consumer preferences increases the saving rate.

Answered: 1 week ago