Question

you buy 400 shares of stock at a price of $92 and an initial margin of 60 percent. if the maintenance margin is 30 percent, at what price will you receive a margin call? (do not round intermediate calculations. round your answer to 2 decimal places.)

Answer 1

A margin call occurs when the value of the securities in the margin account falls below a certain level, known as the maintenance margin. To calculate the price at which a margin call will occur, we need to determine the value of the securities in the margin account and compare it to the maintenance margin.

To begin, we need to determine the amount of the initial margin deposit:

400 shares * $92/share = $36,800

The initial margin deposit is 60% of the total value of the securities, so we can calculate the total value of the securities:

$36,800 / 0.6 = $61,333.33

The maintenance margin is 30% of the total value of the securities, so we can calculate the value of the securities at which a margin call will occur:

$61,333.33 * 0.3 = $18,400

So, the price will receive a margin call is $18,400.