what is the margin in dée’s account when she first purchases the stock?
by Cameron Sauer
Published 3 years ago
Updated 2 years ago
a. What is the margin in Dée's account when she first purchases the stock? Answer: The stock is purchased for $40 × 300 shares = $12,000. Given that the amount borrowed from the broker is $4,000, Dee's margin is the initial purchase price net borrowing: $12,000 – $4,000 = $8,000.
What is Dee’s margin?
May 31, 2018 · a. The margin in Dée’s account when she first purchases the stock The Purchase Price of share = 100 Shares x $100 per share = $5,600 Amount borrowed from broker = $3,500 Therefore, Margin in Dée’s account when she first purchases the sto… View the full answer
How much does Dée borrow from her broker to pay for purchase?
What is the margin in Dée’s account when she first purchases the stock? $4,000*2 = $8,000. b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call? 30*300= $9,000; 1+8% = 1.08 $4,000*1.08 = $4,320 $9,000 ...
What is margin in trading account?
What is the margin in Dée's account when she first purchases the stock? Margin $ 5,500 b. If the share price falls to $10 per share by the end of Question: Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $20 per share. She borrows $2,500 from her broker to help pay for the purchase.
How much does Dee borrow to buy Internet dreams stock?
Solution (a) Margin at the time of first purchase of the stock. The value of total assets in Dee’s account is $12,000 ($40 × 300). Her total liabilities are $4,000 (Borrowed from her broker). Therefore, her equity in account is $8,000 ($12,000 - $4,000). This $8,000 is called Margin. Therefore, the margin ratio is .
At what price will she receive a margin call?
At what price of the security will the investor receive a margin call? The investor will receive a margin call if the price of the security drops below $66.67.
How is margin call calculated?
A margin call occurs when the percentage of the equity in the account drops below the maintenance margin requirement. How much is the margin call? $12,000*30% = $3600 → amount of equity you were required to maintain. $3600 - $2000 = $1600 → You will have a $1,600 margin call.
What is maintenance margin?
Maintenance margin is the minimum amount of equity that an investor must maintain in the margin account after the purchase has been made. Maintenance margin is currently set at 25% of the total value of the securities in a margin account as per FINRA requirements.
How far does the price of telecom stock have to fall for you to get a margin call?
You will receive a margin call when the stock price falls below $35.71. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? b.
Who pays initial margin?
Key Takeaways
Initial margin is the percent of a purchase price that must be paid with cash when using a margin account. Fed regulations currently require that the initial margin is set at a minimum of 50% of a security's purchase price.
How do you pay back margin?
Margin interest rates are typically lower than those on credit cards and unsecured personal loans. There's no set repayment schedule with a margin loan—monthly interest charges accrue to your account, and you can repay the principal at your convenience.Mar 11, 2022
Do I get my initial margin back?
In futures trading, if the account falls below the specified maintenance margin level, then the broker sends the trader a margin call. This informs the trader that they must immediately deposit sufficient funds to bring the account back up to the initial margin level.
What is a margin account?
A “margin account” is a type of brokerage account in which your broker-dealer lends you cash, using the account as collateral, to purchase securities (known as “margin securities”). Brokerage firms may allow you to have both a margin account and a cash account at the same time.Jun 10, 2021
What is a margin balance in stocks?
Margin balance is the amount of money an investor owes to the brokerage. When an investor uses the brokerage's funds to buy securities, this results in a margin debit balance. Similar to a credit card or traditional loan, a margin balance is a line of credit that the borrower must repay with interest.Feb 22, 2022
How far does the price of telecom stock have to fall for you to get a margin call if the maintenance margin is 30%?
How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. The shares increase in value by 10%: $10,000 * 0.10 = $1,000. You pay interest of = $5,000 * 0.08 = $400.
What will be your rate of return if the price of telecom stock goes down by 8% during the next year the stock currently pays no dividends?
a. If the stock goes down by 8%, we will lose 42000*0.08=$3360.
Which of the following has had the highest historical returns?
The stock market has long been considered the source of the highest historical returns.Mar 17, 2020
