You want to buy $10,000 of securities in your margin account. Your advisor has informed you that you must pay a minimum of $65,000 or 6.5% of the purchase price in cash and thereafter maintain a minimum equity position of 30%. The initial margin requirement is ___ and the maintenance margin is ____
A) 35%; 30%
B) 35%; 70%
C) 65%; 30%
D) 65%; 35%
E) 65%; 70%

Question

Quizplus · Accepted Answer

The initial margin requirement is the minimum amount that an investor has to pay to purchase securities in the margin account. In this case, it is given as $65,000 or 6.5% of the purchase price of $10,000. Therefore, the initial margin requirement is $65,000.
The maintenance margin, on the other hand, is the minimum amount of equity that the investor must maintain in the margin account after the purchase of securities. In this case, the minimum equity position required is 30% of the total value of securities held in the margin account. Therefore, the maintenance margin is 30%.
Hence, the correct answer is C.

You Want to Buy $10,000 of Securities in Your Margin