Question 1

1. Margin Purchases You have $22,000 and

decide to invest on margin. If the initial margin
requirement is 55 percent, what is the
maximum dollar purchase you can make?

Input Area:

Dollars to invest $ 22,000

Initial margin 55%

Output Area:

Maximum investment $ 40,000.00

Question 2

2. Calculating Margin Carson Corporation

stock sells for $17 per share, and you’ve
decided to purchase as many shares as you
possibly can. You have $31,000 available to
invest. What is the maximum number of shares
you can buy if the initial margin is 60 percent?

Input Area:

Stock price $ 17
Dollars to invest $ 31,000
Initial margin 60%

Output Area:
 Maximum investment 51,666.67

Maximum shares 3039.2156863

Question 3
3. Margin You purchase 750 shares of
2nd Chance Co. stock on margin at a
price of $35. Your broker requires you to
deposit $14,000. What is your margin loan
amount? What is the initial margin
requirement?

Input Area:

Shares of stock 750

Stock price $ 35
Required deposit $ 14,000

Output Area:

Margin loan $ 12,250

Initial margin 53.33%

Question 4

4. Margin Return In the previous problem,

suppose you sell the stock at a price of $42.
What is your return? What would your return
have been had you purchased the stock without
margin? What if the stock price is $34 when
you sell the stock?

Shares of stock 750

 Stock price $ 35
Margin $ 14,000
Terminal stock price $ 42
Terminal stock price $ 34

Output Area:

Margin requirement 53.33%

When stock price is $ 42

Return with margin 37.50%

Return without margi 20.00%

When stock price is $ 34

Return with margin -5.36%

Return without margi -2.86%

Question 5

6. Margin Calls You buy 400 shares of stock at a

price of $55 and an initial margin of 60 percent. If
the maintenance margin is 30 percent, at what
price will you receive a margin call?

Input Area:

Share price $ 55
Initial margin 60%
# of shares 400
Maintenance margin 30%
 Output Area:

Total stock purchase $ 22,000

Account equity $ 13,200
Amount borrowed $ 8,800

P* $ 31.43

Question 6

7. Margin Calls You decide to buy 1,200 shares of

stock at a price of $34 and an initial margin of 55
percent. What is the maximum percentage decline in
the stock before you will receive a margin call if the
maintenance margin is 35 percent?

Input Area:

Share price $ 34
Initial margin 55%
# of shares 1,200
Maintenance margin 35%

Output Area:

Total stock purchase $ 40,800

Account equity $ 22,440
Amount borrowed $ 18,360
P* $ 23.54

Percentage stock dec -30.77%

Question 7
11. Margin Calls on Short Sales The stock of Flop
Industries is trading at $17. You feel the stock price will
decline, so you short 900 shares at an initial margin of 60
percent. If the maintenance margin is 30 percent, at what
share price will you receive a margin call?

Input Area:

Short shares 900

Share price $ 17
Initial margin 60%
Maintenance margin 30%

Output Area:

Proceeds from short $ 15,300

Margin deposit $ 9,180
Total assets $ 24,480

P* (margin call above $ 20.92

 and
argin
 26250
$ 12,250
$ 31,500.00
$ 19,250
61.11%
37.50%

k at a
ent. If
hat
op
e will
n of 60
at what

P* (margin call above this price)= (Initial Margin Deposit + Short Proveeds)/Number of shares 1+
Maintaince Margin
Initial investment
Margin Loan
new investment
new equity
new margin
Return