Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions

Question:

Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at $35 per share.

a. How many shares can Lauren purchase using the maximum allowable margin?

b. What is Lauren's profit (loss) if the price of Gentry's stock

i. Rises to $45?

ii. Falls to $25?

c. If the maintenance margin is 30 percent, to what price can Gentry Wine fall before Lauren will receive a margin call?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...