Assume you have a margin account with a 50% initial margin.You purchase 100 shares of Microsoft at $150 per share.The price increases to $175 per share.What is the net value of your investment (margin)now?
A)$17,500
B)$15,000
C)$ 7,500
D)$ 3,750
E)None of the above

Question

Quizplus · Accepted Answer

The initial cost of the investment is 100 shares * $150/share = $15,000. With a 50% initial margin, you would have put down $7,500 of your own money. When the price increases to $175 per share, the total value of the shares is 100 shares * $175/share = $17,500. The net value of your investment (equity) is the current value of the shares ($17,500) minus the amount borrowed ($7,500), which equals $10,000. Since this option is not listed, the correct answer is E) None of the above.

Assume You Have a Margin Account with a 50% Initial