What is your rate of return on the margin position one year

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Reference no: EM131841901

Your brokerage has an initial margin of 60%, a maintenance margin of 40%, and a broker's call money rate of 4%. You depost $6,600 into your account, and are seeking to purchase as many shares as possible of Echsrop Company, which is currently trading at $20.00. Assume that after one year, the price of Echsrop Company is $12.33.

1) What is your rate of return on the margin position one year after purchasing the shares?

a) -38.35%

b) -46.19%

c) -51.62%

d) -66.58%

2) If after one year the price of Echsrop Company is $12.33, then you will receive a margin call. How much would you need to deposit into your account in order to reach the maintenance margin level, and keep the margin position alive?

a. $516.10

b) $507.10

c) $331.10

d) $325.10

Reference no: EM131841901

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