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Allisa [31]
3 years ago
13

You purchased 100 shares of common stock on margin at $45 per share. Assume the initial margin is 50% and the stock pays no divi

dend. What would the maintenance margin be if a margin call is made at a stock price of $30? Ignore interest on margin. A) 0.33 B) 0.55 C) 0.43 D) 0.23 E)0.25
Business
1 answer:
Irina-Kira [14]3 years ago
7 0

Answer:

E)0.25

Explanation:

The calculation of the maintenance margin is shown below:

Maintenance margin = Number of shares purchased × price - loan amount ÷  Number of shares purchased × price

= 100 shares × $30 - $2,250 ÷ 100 shares × $30

= $3,000 - $2,250 ÷ $3,000

= $750 ÷ $3,000

= 0.25

And, the loan amount equal to  

= Number of shares purchased × per share price × initial margin

= 100 shares × $45 × 50%

= $2,250

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