Given a maintenance margin of 30 per cent, when you buy on margin you must consider...

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Given a maintenance margin of 30 per cent, when you buy on margin you must consider how far the share price can fall before you receive a margin call. The computation for our example is as follows. If the price of the share is P and you own 200 shares, the value of your position is 200P and the equity in your account is (200P - $5000). The percentage margin is (200P - 5000)/200P. To determine the price, P, that is equal to 30 per cent (0.30), we use the following equation: 200P-5000 0.30 200P 200P-$5000 = 60P 140P = $5000 P = $35.71 Given a maintenance margin of 30 per cent, when you buy on margin you must consider how far the share price can fall before you receive a margin call. The computation for our example is as follows. If the price of the share is P and you own 200 shares, the value of your position is 200P and the equity in your account is (200P - $5000). The percentage margin is (200P - 5000)/200P. To determine the price, P, that is equal to 30 per cent (0.30), we use the following equation: 200P-5000 0.30 200P 200P-$5000 = 60P 140P = $5000 P = $35.71

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