Not long ago, Jack Edwards bought 200 shares of Almost Anything Inc. at S45.00 p

Question

Not long ago, Jack Edwards bought 200 shares of Almost Anything Inc. at S45.00 per share: he bought the st kon ma in o 6 %, The stoc no a nga 00 per share, and the Federal Reserve has recently lowered initial margin requirements to 50%. Jack now wants to do a little pyramiding and buy another 300 shares of the stock. What is the minimum amount of equity that he'l have to put up in this transaction? The minimum amount of equity that he'll have to put up in this transaction is s(Round to the nearest cent.)

Explanation / Answer

Solution :-

Margin money is that money which is a person has to deposited for buying shares.

The Number of shares today = 200

Price at which shares purchased = 45

The Initial margin at that time = 60%

Therefore the money deposited or paid = 200*45*60% = 5400

The current price of the share = 60

The profit per share = 60 - 45 = 15

The total profit on 200 shares = 15*200 = 3000

The person wants to purchase shares = 300

The price per share = 60

the intial margin at present = 50%

the amount required to purchase 300 shares today = 60*300*50% = 9000

The Net amount needed = Amount to purchase share less profit of previous share

Minimum amount of equity need to put up in account = 9000 - 3000 = $6000

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