1. Stock A’s current market price is $100. You have $150 of cash in your account. The initial margin requirement and the maintenance margin requirement are both 50%. The annual interest rate on margin loans is 20%. You bought two shares at the beginning of the year.
   1. Is the initial margin requirement satisfied? Answer yes or no and show the calculation.
   2. Calculate stock A’s end-of-year price at which you will receive a margin call.
   3. Assume the price is $50 at the end of the year, and you receive a margin call. How much cash do you need to add to your account to satisfy the margin requirement?
   4. Assume the price is $40 at the end of the year, and you receive a margin call. But you don’t have any cash to add to your account. How many shares do you need to sell to satisfy the margin requirement (assume you can sell fractional shares)?

Answer rating: 100% (QA)

To determine if the initial margin requirement is satisfied and calculate the endofyear price for a margin call lets go through the calculations 1 Ini... View the full answer