Question

Assume that an investor buys 250 shares of stock at $ 36.55 per​ share, putting up a 46 % margin. a. What is the value of the​ position? b. How much equity capital must the investor provide to make this margin​ transaction? c. What is the debit balance in this​ transaction? a. The value of the position is ​$ nothing. ​(Round to the nearest​ dollar.) b. The amount of equity funds the investor must provide to make this margin transaction is ​$ nothing. ​(Round to the nearest​ dollar.) c. The debit balance in this transaction is ​$ nothing. ​ (Round to the nearest​ dollar.)

Answer 1

Answer:

Debit balance is transaction amount minus margin: (250 × $36.55) − 0.46 × (250 × $36.55) = $4934.25

Equity is the margin amount, or 0.46 × (250 × $36.55) = $4203.25

Margin = (Value − Debit balance)/Value = [(250 × $46) − $4934.25] ÷ (250 × $46) = 57.09%.