If the stock price drops to $60, the % margin in the account is 25%. This is calculated by taking the amount of money you put in initially (in this case $500) divided by the total value of the stock (in this case $1000 x $60 = $6,000). This comes to 500/6000 = 0.083 which is equal to 25%. The rate of return is -25%, which is calculated by taking the difference between the current value of the stock and the original cost of the stock (($60 - $80) / $80 = -25%).

How is .083 equal to 25%??

Answer rating: 100% (QA)

Heres a breakdown Margin Ratio The margin ratio is NOT equal to the percentage return on investment ... View the full answer