You decide to buy 900 shares of stock at a price of $78 and an initial...

Question

Question

Answer 1

Answer #1

Total investment in the shares =900*$78

=$70,200

100%-70% = 30% will be on margin( 70% of $70,200 is payed)

30% of $70,200( borrowed amount)= $21,060

stock price when before you receive a margin call

21,060/(1-maintenance margin)= 21,060/(1-0.40)

= $35,100

stock price =35100/900= $39

% decline in the stock price= 78-39/78 = 50%

Answer 2

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