You purchased 100 shares of common stock on margin at $45 per share.Assume the initial margin is 50% and the stock pays no dividend.What would the minimum margin be if a margin call is made at a stock price of $30? Ignore interest on margin.

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Quizplus · Accepted Answer

The minimum margin is calculated as (Equity/Stock Value). Initially, you invested $2250 (50% of $4500). At $30 per share, the stock value is $3000. The equity is $3000 - $2250 = $750. The minimum margin is $750/$3000 = 0.25.

You Purchased 100 Shares of Common Stock on Margin at $45