Value of investment= 400*50$= 20000$
Initial margin (50% of value)= 10000$
Minimum margin (30% of investment)= 6000$
a) Being the initial margin money transferred to broker account
Security Margin Account
Particulars | Debit amount | particulars | Credit amount |
To cash | 10,000 | ||
Broker account
Particulars | Debit amount | particulars | Credit amount |
Cash Account/Bank account
Particulars | Debit amount | particulars | Credit amount |
by Security Margin | 10000 | ||
b) Investor would receive a margin call when the price of the share increases by 10 $ or more i.e when the share price rise to 60$ or more he would receive a margin call.
c) Since the investor is short on shares and the price has fallen, he would have $ 4000 (10 $ *400 shares) added in his security margin account
Security Margin Account
Particulars | Debit amount | particulars | Credit amount |
To cash | 10,000 | ||
to P/L A/c | 4000 | ||
Profit & loss A/c
Particulars | Debit amount | particulars | Credit amount |
by margin | 4000 | ||
d) Actual Margin is 14000$/400 shares= 35$
e) Investors return= 4000/10000*125/365= 13.70%
IN CASE OF ANY DOUBTS OR CORRECTIONS FEEL FREE TO COMMENT BELOW
THANK YOU
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