Last week,Danielle purchased 200 shares of High Tech Heaven,Inc on margin for $50 per share.This week,the price of High Tech Heaven's shares dropped by $10 per share due to a poor profit outlook.Danielle should anticipate:

Question

Quizplus · Accepted Answer

When purchasing stocks on margin, the investor borrows money from the broker to purchase additional shares. However, if the stock price decreases, the value of the collateral (the shares themselves) also decreases. When the value of the collateral falls below a certain threshold, known as the maintenance margin, the investor may receive a margin call from the broker demanding additional funds to make up the shortfall. In this scenario, since the stock price dropped by $10 per share, the value of Danielle's shares dropped by $10 * 200 = $2000, which may fall below the maintenance margin threshold and trigger a margin call from her broker. Therefore, choice B is the best answer.

Last Week,Danielle Purchased 200 Shares of High Tech Heaven,Inc on Margin