1. If you buy 100 shares of a stock at $50 on 40% margin and it...

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Answer 1

Answer #1

Initial Margin = Investment Value*Initial Margin Requirement = (100*50)*40% = $2000

Value of Investment after decline = 36*100 =$3600

Maintenance Margin after decline = Value after decline*Maintenance Margin requirement = 3600*25% = $900

MTM after decline = Initial Margin - Decline in Value = 2000 - (5000-3600) = $600

Margin Call = Maintenance Margin - MTM after decline = 900-600 = $300

Answer 2

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