Question

Your Margin account have $400 in cash. Price of the stock is $10 per share. Earlier bought a stock with 50% margin allowed by your broker, and use full margin. The 50% margin: 80 shares can be purchase and $800 is value of your account after the purchase. Now, suppose the broker issues margin call if margin % fall to 25%. The 25% margin: 160 shares can be purchase, $300 is value of your account after the purchase, and stock price will be $6.67 per share.

How much your account will be worth, after broker sells the required amount of securities?

Margin call = 25% is the Minimum margin requirement

Answer 1

The value of the share was $300 with 25% margin

Hence, the price of the share = (300*25%)/10

= $7.5 per share

Now, the price of the share has fallen from $7.5 to $6.67

So Loss = $7.5-$6.67

=$0.83

Number of share= 160

So the total loss = 160*$0.83

= $132.8

So, the account will be worth after broker sells the required amount of securities = $300-$132.8

= $167.2