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Assume you purchased 400 shares of XYZ common stock on margin at $30 per share from your broker. A. If the initial margin is 55%, the amount you borrowed from the broker is $5400 . B. What is the new margin
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Assume you purchased 400 shares of XYZ common stock on margin at $30 per share from your broker. A. If the initial margin is 55%, the amount you borrowed from the broker is $5400 . B. What is the new margin if the price of share falls to $26?

User Flavaflo
by
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1 Answer

7 votes

Answer:

Part A. $5,400

Part B. $5,720

Step-by-step explanation:

Part A.

The Amount borrowed can be calculated by

Amount Borrowed= 400 shares * $30 per share * (100% - 55%) = $5,400

Part B.

The New margin was 55% and as per the requirements the price of the share is $26, so

The New Margin = 400 shares * $26 per share * 55% = $5,720

User Janay
by
5.1k points
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