You purchased 100 shares of common stock on margin at $60 per share. Assume the initial margin is 60% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $40? Ignore commission and interest on margin.

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Business

India Castillo

7 May, 21:29

You purchased 100 shares of common stock on margin at $60 per share. Assume the initial margin is 60% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $40? Ignore commission and interest on margin.

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Answers (1)

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King Wilkinson · Answer 1

The answer is 0.46

Explanation:

Firstly, 100shares x $60 x0.6

=$3,600

Step 2:

$3,600 x 0.6

=$2,160

Step 3:

100 x $40 - $2,169/100 x$40

$4,000 - $2,160/$4,000

$1,840/$4,000

0.46