What will the margin position of the account

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Ravi buys the 1,000 shares of RS through his margin account (bear in mind that this is a $20,000 transaction).

1. What will the margin position of the account be after the RS transaction if Ravi follows the prevailing initial margin (50%) and uses $10,000 of his money to buy the stock?

2. What if he uses only $2,500 equity and obtains a margin loan for the balance ($17,500)?

3. How do you explain the fact that the stock can be purchased with only 12.5% margin when the prevailing initial margin requirement is 50%?

Reference no: EM132971556

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