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  3. the margin is computed using the following formula

The margin is computed using the following formula: m=...

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Accounting

The margin is computed using the following formula:

m= (S-B/)S

where m is the margin, S is the value of the stock, and B is the amount borrowed.[1] Remember that this figure must be at least 50% on any day of a transaction and at least 25% or 30%, depending on the maintenance margin requirement of the exchange and broker, on any day on which a trade is not done. Margin is computed on a portfolio basis, so you can be under-margined on one stock and over-margined on another as long as the overall margin meets the requirements. When the overall margin requirements are not met when a trading day closes, the investor is subject to a margin call, dipping below is okay in the middle of a trading day.

As an example, suppose you borrowed $40 and combined that with $60 of your own money to buy a $100 stock. Your margin is 60% so it exceeds the 50% minimum. Let the maintenance margin requirement be 30%.

  1. If the stock climbs to $105, what is your margin? Are you subject to a margin call?

  1. If the stock falls to $70. What is your margin? Are you subject to a margin call?

  1. If the stock falls to $50. What is your margin? Are you subject to a margin call?

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