BU111 Lecture 10: BU 111 Lecture 10: Lecture #10: Economic Factors (continued)
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**at any given moment, the broker is only willing to lend you 30% of the. Borrowing factor and the interest rate on the loan. Must sign hypothecation agreement (margin account agreement form) pledging of securities as collateral for loan. Must pay interest on loan the investors % of equity (margin) in the margined stock must always be greater than (or equal to) the minimum margin requirement. Call (same example with stock xyz above) one month into the transaction, the price drops to. (cmv = x 200 shares = ) Example: capital gain & yield after call two months after the call, sell stock xyz at . What is the maximum profit you can make: in theory, infinite. What is the maximum loss: price paid for the stock. Risks/costs: interest expense, cmv can drop margin call from your broker lent money drops.
