An investor buys $8 000 worth of a share priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. In one year the investor gets a margin call. At the time of the margin call the share's price must have been ________.

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The investor initially buys 200 shares ($8,000 / $40) using $4,000 of their own money and $4,000 on margin. The maintenance margin requirement is 30%, so the equity must be at least 30% of the total market value of the shares. If the share price drops to $29.77, the total value of the shares is $5,954 (200 shares * $29.77). The loan amount with interest is $4,240 ($4,000 + 6% of $4,000). The equity is $1,714 ($5,954 - $4,240), which is 28.8% of $5,954, triggering a margin call as it is below the 30% maintenance margin.

An Investor Buys $8 000 Worth of a Share Priced