You want to purchase GM stock at $40 from your broker using as little of your own money as possible.If initial margin is 50% and you have $4,000 to invest, how many shares can you buy?
A)100 shares
B)200 shares
C)50 shares
D)500 shares

Question

Quizplus · Accepted Answer

With an initial margin of 50%, you can purchase stocks worth twice the amount of your investment. Therefore, your total purchasing power is $8,000 (2 x $4,000). Dividing $8,000 by the stock price of $40 gives us 200 shares. Therefore, you can buy 200 shares of GM stock with the given scenario.

You Want to Purchase GM Stock at $40 from Your