You have bought 1000 shares on margin at $50 per share,putting up $25 000.The stock price has increased to $65.If the margin rate is 50 percent,how much more will the broker lend you?

Question

Quizplus · Accepted Answer

With a margin rate of 50%, the initial margin requirement would be 50% of the total purchase price, which is 50% x $50 x 1000 = $25,000. Since the stock has increased to $65 per share, the total value of the shares is now $65 x 1000 = $65,000.
Based on the initial margin of $25,000, the investor has a remaining equity of $40,000 ($65,000 - $25,000), which is greater than the margin requirement of $32,500 ($65,000 x 50%). Therefore, the investor has $7,500 ($40,000 - $32,500) of excess equity, which the broker can lend out. Therefore, the answer is C) $7,500.

You Have Bought 1000 Shares on Margin at $50 Per