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1 vote
Your margin account has a loan of $7000 outstanding and 500

shares trading at $32 each. If the margin requirement on the
account is 10%, how much may you withdraw from the account without
triggering a

User Morla
by
8.1k points

1 Answer

7 votes

You may withdraw up to $7,400 from your margin account without triggering a margin call.

The margin requirement is 10%, you need to maintain a minimum equity of 10% of the total value of your securities.

First, calculate the total value of your securities by multiplying the number of shares (500) by the current trading price per share ($32):

Total value of securities = 500 shares * $32/share = $16,000

Next, calculate the minimum equity required by multiplying the total value of the securities by the margin requirement (10%):

Minimum equity required = $16,000 * 10% = $1,600

Now, subtract the loan amount from the total value of the securities to determine your equity:

Equity = Total value of securities - Loan amount = $16,000 - $7,000 = $9,000

To find out how much you may withdraw without triggering a margin call, subtract the minimum equity required from your current equity:

Maximum withdrawal = Equity - Minimum equity required = $9,000 - $1,600 = $7,400

Therefore, you may withdraw up to $7,400 from your margin account without triggering a margin call.

User Jeff Schmitz
by
8.2k points
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