Trading On Margin: Example cont. Suppose the maintenance margin is 30%. How far could the stock price fall before the investor would get a margin call? Leverage Effect of Trading on Margins Upside: No margin: > Purchase 100 shares @ $50 and sell them @ $70 in 1 year. > Profit = ? & Return = ? Margin: > Purchase 200 shares @ $50 by borrowing $5000 at 9%. > Sell 200 shares @ $70 in 1 year > Profit = ? > Return = ? What if stock price goes to $30 instead of $70? > No Margin: > On Margin