You decide to buy 1,300 shares of stock at a price of $36 and an initial margin

Question

You decide to buy 1,300 shares of stock at a price of $36 and an initial margin of 65 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 40 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.)

You decide to buy 1,300 shares of stock at a price of $36 and an initial margin of 65 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 40 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.)

Explanation / Answer

Soln:

Margin call price = $ 36 X (1-.065) / (1-0.40)

Margin call price = 21

Percentage decline = 100X21/36

Percentage decline = 58.33%

Maximum percentage decline in the stock before you will receive a margin call = 41.67%

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