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Not long​ ago, Jack Edwards bought 300 shares of Almost Anything Inc. at $ 41.63 per​...

Not long​ ago, Jack Edwards bought 300 shares of Almost Anything Inc. at $ 41.63 per​ share; he bought the stock on margin of 64 %. The stock is now trading at $ 64.63 per​ share, and the Federal Reserve has recently lowered initial margin requirements to 52 %. Jack now wants to do a little pyramiding and buy another 350 shares of the stock. What is the minimum amount of equity that​ he'll have to put up in this​ transaction?

The minimum amount of equity that​ he'll have to put up in this transaction is

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Existing # of shares Initial purchase price per share Initial margin of the existing shares Existing Equity balance 300 $41.63 64% $7,992.96 [300 x $41.63 x б496] $4,496.04 [300 x $41.63 - $7,992.96] Existing Debit balance New Debit balance-Total value of investment at new price x (1-New margin %) Existing # of shares New share price (given) New value of existing shares Add: Value of new shares Total value of investment at new price $42,009.50 [$19,389.00 $22,620.50] New margin percentage New Debit balance Existing Debit balance Additional Debit that can be borrowed $15,668.52 [$20,164.56 - $4,496.04] (New Debit balance minus Existing Debit balance) Therefore, 300 $64.63 $19,389.00 [300 x $64.63] $22,620.50 [350 x $64.63] 52% $20,164.56 [$42,009.50 x (1-52%) $4,496.04 [As calculated above] Minimum amount of equity that hell have to put up in this transaction is $6,951.98 [$22,620.50 - $15,668.52] (Value of new shares minus Additional Debit that can be borrowed) or $6,952 (If rounded off to zero decimal)

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