Additional dollars and reduce the margin loan amount

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Reference no: EM13868406

At the beginning of the day, you purchased 500 shares of stock for $36 a share. The initial margin requirement is 60 percent. Unless otherwise stated, assume that for purchasing the shares your borrowed amount is the maximum allowed borrowing. You are also given that the maintenance margin is 40 percent. At the end of the day, the closing price of stock is $23.04 a share. Will you receive a margin call? If yes, then show that by following three alternative approaches, you can take care of the margin call. These are (a) bring some additional dollars and keep them as security deposit (b) bring some additional dollars and reduce the margin loan amount, and (c) sell some shares and reduce the margin loan amount. Prepare the balance sheet for each alternative after you have taken care of the margin call. For alternative (c), assume that you can sell the fraction of shares.

Reference no: EM13868406

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