Question
You purchase a stock that currently does not pay a dividend on margin with an initial margin of 80% and initial equity of $5,000. At
You purchase a stock that currently does not pay a dividend on margin with an initial margin of 80% and initial equity of $5,000. At the time you purchased the stock, the share price was $125. You plan to hold this position for the next 90 days. The effective margin rate on the loan is 14% and the maintenance margin requirement is 30%. Based on this information, are the following statements true or false:
I. You will receive a margin call if the share price at the end of the first month is between $50 and $75.
II. You will receive a margin call if the share price at the end of the first month is between $75 and $100.
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