Assume that your brokerage company requires an initial margin of 65% and a maintenance margin of...

Assume that your brokerage company requires an initial margin of 65% and a maintenance margin of 40%. Assume further that you want to buy 1200 shares of Madoka Corp. at $75 per share.

A. Calculate the maximum amount of debt you could borrow.

b. Calculate the price below which you will receive a margin call, assuming you borrowed the amount of debt in “a”.

c. Show what the account balance sheet would look like if the stock reaches the price in “b” above.

d. [From “c”] Show that you are at a 35% margin.

Expert Solution

jeff jeffy answered 2 years ago

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