You purchase 300 shares of stock on margin at a price of $42 per share plus $150 in brokerage commissions at a time when the margin requirement is 50%.How much additional cash would you need to deposit with your broker if the price of the stock dropped to $37 per share?

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Quizplus · Accepted Answer

The margin requirement is 50%, so you need to deposit 50% of the purchase price in cash. The purchase price is $42 per share x 300 shares = $12,600. So, you need to deposit $12,600 x 50% = $6,300 in cash. You have already deposited $150 in brokerage commissions, so you need to deposit an additional $6,300 - $150 = $6,150. If the price of the stock drops to $37 per share, the value of your shares will be $37 per share x 300 shares = $11,100. Since you have already deposited $6,300 in cash, you will need to deposit an additional $11,100 - $6,300 = $4,800 to meet the margin requirement. So, the total additional cash you need to deposit is $6,150 + $4,800 = $10,950.

You Purchase 300 Shares of Stock on Margin at a Price