Question

Assume you purchased 700 shares of XYZ common stock on margin at $40 per share from your broker. If the initial margin is 65%, the amount you borrowed from the broker is _________.
a. $18,200

b.$28,000

c.$37,800

d.$9,800

Answer 1

Answer:

Option D is correct ($9,800)

Explanation:

Option D is correct ($9,800)

Given:

Shares Purchased of XYZ common stock= 700 shares

Margin at which shares are purchased= $40

Initial Margin= 65%

Required:

Amount you borrowed from the broker=?

Solution:

Amount you borrowed from the broker= Shares*Margin at which shares are purchased* (1-Initial Margin)

Amount you borrowed from the broker= 700*$40*(1-0.65)

Amount you borrowed from the broker= $9,800