Donna recently purchased 600 shares of Deltona stock for $37 a share. Her broker required a cash payment of $16,650, plus trading costs, for the purchase. What is the initial margin requirement on this stock?

Question

Quizplus · Accepted Answer

The initial margin requirement is the percentage of the purchase price that must be paid in cash upfront. To calculate it, we need to divide the cash payment by the total purchase price:
Initial margin requirement = (Cash payment ÷ Total purchase price) x 100%
Total purchase price = 600 shares x $37/share = $22,200
Initial margin requirement = ($16,650 ÷ $22,200) x 100% = 75%.
Therefore, the correct choice is C.

Donna Recently Purchased 600 Shares of Deltona Stock for $37