Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the ABC company. The initial margin requirement is 40% and ABC’s stock price is currently K50. Ignore taxes, commissions and interest on the amount borrowed. What is Rob’s percentage return if he buys the stock on margin and the price increases to K55? And If the maintenance margin is 30%, at what price would Rob receive a margin call from his broker?
Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the ABC company. The initial margin requirement is 40% and ABC’s stock price is currently K50. Ignore taxes, commissions and interest on the amount borrowed. What is Rob’s percentage return if he buys the stock on margin and the price increases to K55? And If the maintenance margin is 30%, at what price would Rob receive a margin call from his broker?
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 68P
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- Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the ABC company. The initial margin requirement is 40% and ABC’s stock price is currently K50. Ignore taxes, commissions and interest on the amount borrowed. What is Rob’s percentage return if he buys the stock on margin and the price increases to K55? And If the maintenance margin is 30%, at what price would Rob receive a margin call from his broker?
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