Question

A new client of the member firm has just opened a margin account. After account approval, the client's initial trade is an order to purchase 100 shares of LMN common stock at $25. With Regulation T at 50%, in order to be in compliance with all regulations, the client would need to deposit:___________

Answer 1

$2,000

Explanation:

Data provided in the question

Number of shares purchased = 100 shares

Price of common stock = $25

Given percentage = 50%

Based on the above information, there is no borrowing taken place in a margin account because there is a minimum requirement to maintain $2,000 in equity and when the purchase is made lower than $2,000 so it is important to pay the amount in full and the deposits are important when it is made more than $2,000 in the case when the trade is more than $4,000