Question

The margin requirement on a stock purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25.

Answer 1

Answer:

Return or Percentage Loss=-0.48=-48%

Explanation:

Given Data:

The margin requirement on a stock purchase =25%

Number of shares=100 shares

Price of purchase=$25/ share

Drop in Price=$22

Required:

Percentage loss=?

Solution:

Loss occurred=($22-$25)*100

Loss occurred=-$300

Actual amount at which shares are bought=0.25*($25*100)

Actual amount at which shares are bought=$625

Return or Percentage Loss=$\frac{Loss}{Actual \ Amount}$

Return or Percentage Loss=$\frac{-300}{625} =-0.48$

Return or Percentage Loss=-0.48=-48%