2. Suppose X Corp stock is trading at $100 per share. You think the stock...
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2. Suppose X Corp stock is trading at $100 per share. You think the stock price will go up in the future thus interested in investing in it. You have $10,000 cash and want to use buying on margin from your broker. The initial margin requirement is 50% and the maintenance margin requirement is 40%. You purchased 200 shares using your cash and money borrowed from your broker.
(a) Construct your initial balance sheet after this investment.
(b) Suppose one month later, the stock price falls to $80 per share. Construct your new balance sheet and calculate your margin percentage and state whether you will receive a margin call.
(c) How far can the stock price fall before receiving a margin call from your broker?
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