Question

Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. a. What is the margin in Dée’s account when she first purchases the stock?

Answer 1

Margin in Dee's account when she first purchase the stock is $8,000

Step-by-step explanation:

The total value of stock purchased = $40 × 300 shares = $12,000

Since the amount borrowed from the broker is $4,000. Therefore, Dee's margin will be calculated as;

= Total purchase price - Net borrowing

= $12,000 - $4,000

= $8,000