Stephen is purchasing 800 shares of KPT, Inc., stock at a price per share of $26.00. What is the minimum amount the Federal Reserve will require Stephen to pay in cash for this purchase?
A) $4,488
B) $7,480
C) $10,400
D) $11,968
E) $14,960

Question

Quizplus · Accepted Answer

The minimum amount the Federal Reserve will require Stephen to pay in cash is the initial margin requirement, which is currently set at 50%. Thus, Stephen will need to pay 50% of the total cost of the purchase in cash, which is calculated as follows:

800 shares * $26.00 per share = $20,800 total cost 
$20,800 * 50% = $10,400

Therefore, the correct answer is C) $10,400.

Stephen Is Purchasing 800 Shares of KPT, Inc