You purchase 300 shares of stock on margin at a price of $42 per share plus $150 in brokerage commissions at a time when the margin requirement is 50%. How much additional cash would you need to deposit with your broker if the price of the stock dropped to $37 per share?

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The initial investment is $12,750 (300 shares x $42 + $150 commission). With a 50% margin, you initially deposit $6,375. If the stock price drops to $37, the value is $11,250 (300 x $37). The equity is now $4,875 ($11,250 - $6,375 loan). To maintain a 50% margin, equity should be $5,625 (50% of $11,250), so you need to deposit an additional $750 ($5,625 - $4,875).

You Purchase 300 Shares of Stock on Margin at a Price