Question
Your brokerage has an initial margin of 60%, a maintenance margin of 40%, and a broker's call money rate of 4%. You deposit $6,600 into
Your brokerage has an initial margin of 60%, a maintenance margin of 40%, and a broker's call money rate of 4%. You deposit $6,600 into your account, and are seeking to purchase as many shares as possible of Vandelay Industries, which is currently trading at $20.00. Assume that after one year, the price of Vandelay Industries is $12.33.
1) What is your rate of return on the margin position one year after purchasing the shares?
2) If after one year the price of Vandelay Industries is $12.33, then you will receive a margin call. How much would you need to deposit into your account in order to reach the maintenance margin level, and keep the margin position alive?
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