You purchase 500 shares of Richards Incorporated at $50 per share using an initial margin of 60%. Your maintenance…

You purchase 500 shares of Richards Incorporated at $50 per share using an initial margin of 60%. Your maintenance…

Question:

 

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You purchase 500 shares of Richards Incorporated at $50 per share using an initial margin of
60%. Your maintenance margin is 25% and the minimum initial margin is 50%.
A. How low can the stock price fall before you receive a margin call? B. If the stock price falls to $21 a share, how much additional equity must you add to your
account?

Expert Answer:

Answer rating: 100% (QA)

A To determine how low the stock price can fall before you receive a margin call we need to calculat
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