Question

In: Finance

Suppose that Intel currently is selling at $50 per share. The rate on margin loan is...

Suppose that Intel currently is selling at $50 per share. The rate on margin loan is 8%. Investor A purchased 100 shares using 60% margin. Investor B sold 100 shares using 60% margin. The maintenance margin is 40%. 1. Calculate the margin call price for Investor A 2. Calculate the margin call price for Investor B

Solutions

Expert Solution

1.

Margin Call Price for Investor A = 50(1 - 0.60)/(1 - 0.40)

Margin Call Price for Investor A = $33.33

2.

Margin Call Price for Investor B = 50(1 + 0.60)/(1 + 0.40)

Margin Call Price for Investor B = $57.14


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