An investor buys 100 shares of TechMart at $45 per share on margin and puts up margin of 70 percent. The required margin is 25 percent. In two months, the stock goes to $56.
-What is the actual margin of the stock when it is at $56?
A) 65.9%
B) 75.9%
C) 79.9%
D) 80.9%

Question

Quizplus · Accepted Answer

The actual margin when the stock is at $56 can be calculated as follows: The investor initially invests 70% of the total value, which is 100 shares * $45/share * 70% = $3150. When the stock price increases to $56, the total value of the shares becomes 100 shares * $56/share = $5600. The equity in the account is the total value minus the borrowed amount, which is $5600 - ($4500 - $3150) = $4250. The actual margin is the equity divided by the total value, or $4250 / $5600 = 75.9%.

An Investor Buys 100 Shares of TechMart at $45 Per