Jim purchased 100 shares of stock at a price of $32 a share.He utilized his 80% margin account to make the purchase.What is Jim's initial equity in this investment?

Question

Quizplus · Accepted Answer

First we need to calculate the total cost of the 100 shares: 
100 shares x $32 per share = $3,200 
Then we need to calculate the amount Jim borrowed on margin: 
$3,200 x 0.8 = $2,560 
Finally, we can calculate Jim's initial equity: 
$3,200 - $2,560 = $640 
So the answer is C, $2,560.

Jim Purchased 100 Shares of Stock at a Price of $32