You short sold 600 shares of stock at a price of $43 and an initial margin of 60

Question

You short sold 600 shares of stock at a price of $43 and an initial margin of 60 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price? (Do not round intermediate calculations. Round Margin call price to 2 decimal places. Omit the "$" sign in your response.)

You short sold 600 shares of stock at a price of $43 and an initial margin of 60 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price? (Do not round intermediate calculations. Round Margin call price to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Margin call price = (Purchase Price*(1-initial Margin))/(1-Maintenance Margin)

Margin call price = (43*(1-60%))/(1-30%)

Margin call price = $ 24.57

Total Stock Value at Margin call price = 600*24.57

Total Stock Value at Margin call price = 14742

Initial Amount borrowed = 600*43 *(1-60%)

Initial Amount borrowed = 10320

Account Equity = Total Stock Value at Margin call price - Initial Amount borrowed

Account Equity = 14742-10320

Account Equity = $ 4422

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