Allen Bagley bought 300 shares of stock at $98.45 per share, using an initial margin of 55%. Given a maintenance margin of 26%, how far does the stock have to drop before Allen faces a margin call? (Assume that there are no other securities in the margin account.)

Allen Bagley bought 300 shares of stock at $98.45 per share, using an initial margin of 55%. Given a maintenance margin of 26%, how far does the stock have to drop before Allen faces a margin call? (Assume that there are no other securities in the margin account.)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.2IP

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Question

Allen Bagley bought

300

shares of stock at

$98.45

per share, using an initial margin of

55%.

Given a maintenance margin of

26%,

how far does the stock have to drop before Allen faces a margin call? (Assume that there are no other securities in the margin account.)

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