Exhibit 4.3
Use the Information Below for the Following Problem(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
-Refer to Exhibit 4.3.If the maintenance margin is 25 percent,to what price can Jackson Industries fall before Kathy receives a margin call?
A) $21.75
B) $23.00
C) $10.67
D) $15.93
E) None of the above

Question

Quizplus · Accepted Answer

Margin = (Market Value - Debit Balance)¸ Market Value,where
Debit Balance = initial loan value = ($75,000 - $60,000)= $15,000
Market Value = Price × Number of Shares = 1875P
Thus 0.25 = (1875P - $15,000)¸ 1875P
P = $10.67

Exhibit 4.3 Use the Information Below for the Following Problem(S)