You decide to buy 1,800 shares of stock at a price of $68 and an initial margin
ID: 2636823 • Letter: Y
Question
You decide to buy 1,800 shares of stock at a price of $68 and an initial margin of 75 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 30 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.)
You decide to buy 1,800 shares of stock at a price of $68 and an initial margin of 75 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 30 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.)
Explanation / Answer
Soln:
Margin call price = $ 68 ( 1-.75)/ 1-0.30
Margin call price = 11.25/ 0.75
Margin call price = $ 24.28
The percentage = 100X24.28 / 68 = 35.71%
Percentage decline in the stock before you will receive a margin call = 64.29%
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