Question

Currently the price of Titanic stock is $20 a share. You have $40,000 of your own funds to invest. Using the initial margin of 50 percent and maintenance margin of 30 percent, what is your percentage profit if you purchase the stock and it rises to $30 a share (ignore dividends and taxes) and what is the stock price for you to receive a margin call?

Answer 1

Answer:

The percentage profit if you purchase the stock and it rises to $30 a share

= $166.67

Explanation:

Titanic stock is $20 a share. You have $40,000 of your own funds to invest.

∴ $4,000.00/$20 = 200.00 shares were bought with $4,000.00

With margin of 50 percent and maintenance margin of 30 percent,

50% + 20% = 80%

∴  New Cost of Stock ($30.00) ÷ $4,000.00)

= $133.33 X 0.80

= $166.67