The margin requirement on a share purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss?

Question

Quizplus · Accepted Answer

The total cost of 100 shares of MSFT at $25 is $2,500. With a margin requirement of 25%, you only need to put up $625 (25% x $2,500) of your own money and borrow the remaining $1,875 (75% x $2,500) from the broker. 
If the price drops to $22, the total value of your shares is 100 x $22 = $2,200. 
Since you borrowed $1,875 from the broker, your equity is now only $325 ($2,200 - $1,875). 
Therefore, your percentage loss is (325/625) x 100% = 52%. 
The closest answer to this calculation is C, 48%.

The Margin Requirement on a Share Purchase Is 25