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Deposit into your margin account to meet the margin call

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Reference no: EM133475009

You wish to buy $12,000 of Amazon stock, but only have $8,000 to invest, so you decide to borrow the remaining $4,000 and buy the stock on margin. Your broker demands a maintenance rate of 25%. The price of Amazon stock falls sharply from $3,000 when you bought it to $1,200, triggering a margin call.

1. How much cash would you need to deposit into your margin account to meet the margin call?

2. If instead you decide to deposit securities into your margin account, what is the total value of securities you must deposit?

3. If instead you decide to liquidate assets from your margin account, what is the total value of stock you need to sell?

Reference no: EM133475009

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