Exhibit 3.7 Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2...
Exhibit 3.7
Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2 percent for purchases and 2 percent for sales. The interest rate on margin debt is 6.25 percent per year. The maintenance margin is 30 percent.
Refer to Exhibit 3.7. Assume that you purchase 150 shares of RossCorp stock at $45 each by making a margin deposit of 55 percent. At what price would you receive a margin call?
Homework Answers
Answer:
Given data, the Maintenance Margin =30%
Margin Deposit = 55%, Remaining = 45%
So,
Margin % = Equity In account/Value of Stock
0.30 = [150*P - 0.45*150*45]/[150*P]
Implies,
0.30 = [150*P - 3,037.50]/[150*P]
45P = 150P - 3037.50
-105P = -3037.50
P = $28.93
The price at which the margin call will be received is $28.93
Add Answer to:
Exhibit 3.7
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