Suppose that Off-Star currently is selling at $60 per share. You buy 100 shares, borrowing the maximum amount of the purchase price from your broker. If the initial margin is 50% and the maintenance margin is 25%, how low can Off-Star's price fall before you get a margin call? Assume the price fall happens immediately.

answer

watching

142

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Jean KeelingLv2

28 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

You decide to purchase on margin 1000 shares of ABC stock currently trading at $25 each. Your initial margin is 40% and your broker allows you a buffer of 10% before making a margin call â i.e., the maintenance margin is 30%.

(a) How much must you invest initially to purchase the shares and what is the amount you borrow from your broker?

(b) How far can share price fall before a margin call is triggered?

(c) Now assume that share price drops to $20. You received a margin call and you decided to deposit T-bills in your account to increase the margin; the deposit will increase the total value of your margin account while NOT changing the value of the loan. That is, the total value of your account will be the sum of the value of 1000 shares and the value of T-bills. What is the total value of T-bills you need to put up, in order to get the margin back up to the maintenance margin of 30%?

(d) If you do not take an action in time your broker will partly liquidate your position and repay the loan in order to (just) meet the maintenance margin requirement. How many shares would the broker sell in order to get the margin back up to the maintenance margin of 30%?

rosedog311

You've borrowed $18,500 on margin to buy shares in Disney, which is now selling at $37 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $35.40 per share. a-1. What is the percentage margin on the above transaction? (Round your answer to 2 decimal places.) Percentage margin % a-2. Will you receive a margin call? Yes No b. How low can the price of Disney shares fall before you receive a margin call? (Round your answer to 2 decimal places.) Lowest price $

The current price of Alphabet (GOOG) stock is $825 per share. You use the maximum margin of 50% to purchase 200 shares of GOOG. If the maintenance margin level is 25 percent, at what price will a margin call occur? If the maintenance margin level is rather than 25%, at what price will a margin call occur? Please explain.

yellowmuskrat919

Weekly leaderboard

Home

Homework Help 3,900,000

Finance 370,000