You purchased 700 shares of stock for $54.30 a share.The initial margin requirement is 75 percent and the maintenance margin is 35 percent.What is the maximum percentage decrease that can occur in the stock price before you receive a margin call?
A)35 percent
B)38 percent
C)48 percent
D)57 percent
E)62 percent

Question

Quizplus · Accepted Answer

P* = {[700 × $54.30 × (1 - .75)]/700}/(1 - .35) = $20.88462Maximum percentage decline = 1 - ($20.88462/$54.30) = 62 percent

You Purchased 700 Shares of Stock for $54