Assume you purchased 500 of XYZ common shares on margin at $40 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is ________.

Question

Quizplus · Accepted Answer

The total cost of the shares is 500 shares * $40 = $20,000. With an initial margin of 60%, you pay 60% of $20,000, which is $12,000. Therefore, the amount borrowed from the broker is $20,000 - $12,000 = $8,000.

Assume You Purchased 500 of XYZ Common Shares on Margin