NOTE: Questions 37-38 are based on the following information:
An investor buys 100 shares of Walmart at $45 per share on margin with an initial margin of 70 percent and a maintenance margin of 25% percent. In two months, the stock goes to $56.
-What is the actual margin of the stock when it's at $56?

Question

Quizplus · Accepted Answer

To find the actual margin of the stock when it's at $56, we need to calculate the amount of equity the investor has in the stock. 
The initial investment was $45 x 100 = $4500
The initial margin was 70%, so the investor borrowed 30% of the investment, which is $4500 x 30% = $1350.
Therefore, the investor's initial equity was $4500 - $1350 = $3150.
When the stock goes to $56 per share, the total value of the investment is $56 x 100 = $5600.
To calculate the actual margin, we need to use the formula:
(actual equity / total value) x 100%
If the maintenance margin is 25%, then the investor must have at least 25% equity in the investment, which is $5600 x 25% = $1400.
Since the investor's actual equity is $5600 - $1350 = $4250, the actual margin is:
($4250 / $5600) x 100% = 75.9%
Therefore, the best choice is B.

NOTE: Questions 37-38 Are Based on the Following Information