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 maintenance margin be if a margin call is made at a stock price of $30? Ignore interest on margin.
A) 0.33
B) 0.55
C) 0.43
D) 0.23
E) 0.25

Question

Quizplus · Accepted Answer

The maintenance margin is calculated as (Equity/Stock Value). At a stock price of $30, the equity is $1,500 (initial equity) - $1,500 (loss from stock price drop), and the stock value is $3,000. Thus, the maintenance margin is $1,500/$3,000 = 0.25.

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