a) Jack Bolton is optimistic that the shares for Astra Ltd will rise in future. The current share price is $30 per share. He borrows $6000 from your broker and invests a total of $24,000 into Astra Ltd’s shares funding the balance with his own money. Calculate the Margin & Initial Margin Percentage. How far must the share price fall for Jack to get a Margin Call if the maintenance margin is 30%?

b) However now Jack Bolton is pessimistic about Astra Ltd’s shares and short sells 400 shares at the current market price of $30. If Initial Margin Requirement is 30%, what is the cash or securities that Jack must put into his account? If the Maintenance Margin is 35%, how high can a stock price rise before Jack gets a margin call?

Answer rating: 100% (QA)

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