Question

You recently purchased 100 shares of stock at a cost per share of $24.80. The initial margin requirement on this stock is 80 percent and the maintenance margin is 50 percent. The stock is currently valued at $19.80 a share. What is your current margin position?

Answer 1

Answer:

Current Margin = 74.95%

Explanation:

given data

no of share purchased = 100 shares

Stock Cost per share = $24.80

initial margin = 80 percent

maintenance margin = 50 percent

currently valued = $19.80

solution

we get here first Margin Loan that is express as

Margin Loan = No. of shares × Stock Cost × (1 - Initial Margin)    ..........1

put here value and we get

Margin Loan = 100 × $24.80 × (1 - 0.80)

Margin Loan = $496

so here current stock value that is express as

current stock value = No. of Shares × Current Stock Value    ..............2

put here value

current Stock Value = 100 × $19.80

current Stock Value = $1,980  

so here Current Equity is

Current Equity = Current Stock Value - Margin Loan    ............3

Current Equity = $1,980 - $496

Current Equity = $1,484  

so here as we get Current Margin that is

Current Margin = Current Equity ÷  Current Stock Value   ............4

put here value

Current Margin = $\frac{1484}{1980}$  

Current Margin = 74.95%