You open a brokerage account and purchase 200 shares of a stock at $70 per...
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You open a brokerage account and purchase 200 shares of a stock at $70 per share. You borrow $7,000 from your broker to fund your stock purchase. The interest rate on the loan is 8%. The maintenance margin requirement is 30%. 1. What is the initial equity (dollar amount) in your account when you purchase the stock? 2. If the stock price falls to $50 per share in one year, what should be the percentage margin in your account? 3. Will you receive a margin call? 4. What is the rate of return on your investment?
You open a brokerage account and purchase 200 shares of a stock at $70 per share. You borrow $7,000 from your broker to fund your stock purchase. The interest rate on the loan is 8%. The maintenance margin requirement is 30%.
1. What is the initial equity (dollar amount) in your account when you purchase the stock?
2. If the stock price falls to $50 per share in one year, what should be the percentage margin in your account?
3. Will you receive a margin call?
4. What is the rate of return on your investment?
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