Question
You open a brokerage account and purchase 200 shares of XYZ at $40 per share. In addition to your own cash, you borrow $3,500 from
You open a brokerage account and purchase 200 shares of XYZ at $40 per share. In addition to your own cash, you borrow $3,500 from your broker to purchase the shares. The interest rate on the loan is 6%.
a. What is the margin in your account when you first purchase the stock?
b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in your account?
c. If the maintenance margin requirement is 30%, will you receive a margin call? How do you know?
d. What is the rate of return on your investment? (Indicate a negative value by a minus sign and round your answer to 2 decimal places.)
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