1. On 4^th May 2022, Tom invested in 200 shares of Grow Crop using the margin trading facility provided by his broker. The broker requires an initial margin of 60% and a maintenance margin of 50%. The following table shows the limit order book of Grow Crop stocks when Tom placed his market buy order. 

Limit buy orders		Limit sell orders
Price ($)	Shares	Price ($)	Shares
49.75	500	50.50	100
49.50	800	51.50	200
49.25	500	54.75	300
49.00	200	58.25	100
48.50	600

 

1. At what average price Tom's market buy order for 200 Grow Corp stock got transacted? 
2. How much initial investment Tom had to make to buy these 200 Grow Corp stocks using the margin trading facility provided by his broker? 
3. If Grow Corp stock prices drop to $48.00 on 5^th May 2022, do you think Tom will receive a margin call on that day? Justify your answer with appropriate calculations.

Answer rating: 100% (QA)

ANSWER To solve this problem we need to follow the steps below 1 Determine the average price at which Toms market buy order for 200 Grow Corp stocks w... View the full answer