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Suppose you have $400 in cash in your margin account. You want to buy a stock...

Suppose you have $400 in cash in your margin account. You want to buy a stock with 50% margin allowed by your broker and you decide you use full margin. Price of the stock is $10 per share.

  1. If stock price falls to $9, what is your margin % after the price fall?

Solutions

Expert Solution

Value of position bought = $800

Number of shares bought = 800/10 = 80

After price falls,

Value of position = 80(9) = $720

Margin remaining = 720 - 400 = $320

Margin% = 320/800

Margin% = 40%

jeff jeffy answered 2 years ago
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