Question

if a customer has a margin account with a long position worth $20,000 and a debit balance of $8,000, what is the purchasing power of this customer's account?

Answer 1

if a customer has a margin account with a long position worth and the purchasing power of this customer's account is   4000.

Purchasing power is the dollar sum of credit accessible to a client based on the existing marginal securities within the customer's brokerage account. Since the margin value is  $20,000  and the debit balance of $8,000,  so the account will have equity of  $12,000,  since the  50% of the market value is  $10,000, still, the account will have excess equity of   $2,000. Since Regulation is considered to be 50%, the purchasing power of excess equity is 2-for-1.

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