Question

In: Finance

Suppose that you just purchased 250 shares of Beta Banana’s stock for $70 per share. The...

  1. Suppose that you just purchased 250 shares of Beta Banana’s stock for $70 per share. The initial margin requirement is 76.5%, which means the amount borrowed is $4,112. The corresponding balance sheet is below:

Assets

Liabilities and Equity

Stock

$17,500.00

Loan from broker

$4,112.50

Equity

$13,387.50

Total assets

17,500.00

Total liabilities and equity

$17,500.00

a. Now suppose the price of the stock falls to $45 per share. What is your current margin percentage? (Round your answer to 2 decimal places.)

b. Construct the balance sheet to show the current situation.

c. If the maintenance margin is 50%, what is the highest stock price that will trigger a margin call? (Round your answer to 2 decimal places.)

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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