Question

"A customer buys 300 shares of ABC at $40, depositing the Regulation T requirement on the 3rd business day after trade date. He holds the position for two months, during which $100 of interest is charged on the debit balance. What is the adjusted debit balance at the end of the two month period?"

Answer 1

Step-by-step explanation:

Given the following :

Number of shares = 300

Cost per share = $40

Interest charge = $100

Total cost of shares = (number of shares * purchase price)

Total cost of shares = 300 * $40 = $12000

The regulation T says an investor cannot borrow more than 50% of the purchase price.

Therefore, 50% of shares cost :

(50/100) * $12,000

0.5 * $12,000

= $6000

Therefore, Adjusted debit balance :

$6000 + $100 = $6,100