Question

A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has dropped to $40. The minimum maintenance margin requirement is:

Answer 1

$10,000

Step-by-step explanation:

A customer buys 1,000 shares of XYZ

The shares are bought at $60 in a margin account

Two days after the price of XYZ drops to $40

The first step is to calculate the current market value

= 1,000 shares×$40

= $40,000

Therefore, the minimum maintenance margin requirement can be calculated as follows

= 25/100 × current market value

= 25/100 × 40,000

= 0.25×40,000

= $10,000

Hence the minimum maintenance margin requirement is $10,000