Final answer:
To determine the price at which you would get a margin call, we need to calculate the maintenance margin. The maintenance margin is the minimum amount of equity you need to maintain in your account as a percentage of the total value of the stock. In this case, the maintenance margin is 30%. The price at which you would get a margin call is $26.14.
Step-by-step explanation:
To determine the price at which you would get a margin call, we need to calculate the maintenance margin. The maintenance margin is the minimum amount of equity you need to maintain in your account as a percentage of the total value of the stock. In this case, the maintenance margin is 30%.To calculate the maintenance margin, we first need to calculate the total value of the stock. You purchased 100 shares at $50 per share, so the total value is 100 * $50 = $5000. Since your own money is $2500, the amount borrowed is $5000 - $2500 = $2500.
The maintenance margin would be 30% of the total value, which is 0.30 * $5000 = $1500. To find the price at which you would get a margin call, we need to calculate the number of shares you would need to sell.Let's assume the price you sell the shares at is P. You would need to sell (5000 - 0.5P) / P shares to maintain the maintenance margin. The number of shares sold should be less than or equal to 100 (the initial number of shares purchased).So, we can set up the equation (5000 - 0.5P) / P ≤ 100 and solve for P. Solving this equation, we find P ≤ $26.14.Therefore, the answer is option a. $26.14.