You purchased 300 shares of ABC stock on margin when the stock was selling for $24 a share. The stock is currently selling for $28 a share. What is the minimum amount of equity you must have in this security to avoid a margin call if the maintenance margin is 40%?

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Quizplus · Accepted Answer

The minimum amount of equity needed to avoid a margin call can be calculated using the formula: Equity = Current Market Value of Shares - Amount Borrowed. The maintenance margin requirement tells us the minimum percentage of the total value of the shares that must be equity. With a stock currently valued at $28 per share for 300 shares, the current market value is $28 * 300 = $8,400. With a maintenance margin of 40%, the minimum equity required is 40% of $8,400, which is $3,360.

You Purchased 300 Shares of ABC Stock on Margin When