you buy 500 shares of stock at a price of $94 and an initial margin of 50 percent. if the maintenance margin is 40 percent, at what price will you receive a margin call?

Respuesta :

Amount borrowed: (50038) - (50038)(60%) = 7600

Margin call Price = 7600/ 500 shares/ (1-30%) = 21.71 $

How do margin calls work?

A margin call is a request for more equity in your account from your brokerage company. You can accomplish this by adding money to your account, such as cash or marginable securities, or by liquidating existing holdings to get cash.

When a broker requests repayment of part of the funds it borrowed you to acquire assets, this is known as a margin call. A typically occurs after a sharp decline in the value of the securities you purchased. The broker has the power to start selling off your assets if you don't pay the margin call.

When the margin call value of securities in a brokerage account declines below the maintenance margin, a margin call occurs.

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