Question

s the initial transaction in a new margin account, a customer buys 1,000 shares of XYZ stock at $30. The market value increases to $50. Which statements are TRUE? I Equity increases by $10,000 II Equity increases by $20,000 III SMA increases by $5,000 IV SMA increases by $10,000

Answer 1

Equity increases by $20,000 an SMA by $10,000

Step-by-step explanation:

While equity is defined as the remaining value of an owner's interest in a business , the simple moving average is defined as the average of a selected range of prices , usually the closing prices by the number of periods in that range.

For every $1 increase in market value , the SMA increase by $0.5 and the equity by $1

Workings

1000 shares at $30 = $30,000

Market value = 1000* $50 = $50,000

Equity increase - 50,000-30,000 = 20,000

SMA = 20,000 *0.5 = 10,000