For assets purchased or sold on margin, any market price in the range of trigger prices results in argin call (i.e, the investor must pay additional funds into the margin account, the amount of the ca pending on the level to which the margin must be restored). Calculate the range of trigger prices ch of the following cases: a An investor purchases 200 shares at price $15 per share, with an initial margin of 60% and maintenance margin of 50%. b An investor short-sells 100 shares at price $20 per share, with an initial margin of 40% and maintenance margin of 25%.
For assets purchased or sold on margin, any market price in the range of trigger prices results in argin call (i.e, the investor must pay additional funds into the margin account, the amount of the ca pending on the level to which the margin must be restored). Calculate the range of trigger prices ch of the following cases: a An investor purchases 200 shares at price $15 per share, with an initial margin of 60% and maintenance margin of 50%. b An investor short-sells 100 shares at price $20 per share, with an initial margin of 40% and maintenance margin of 25%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:2. For assets purchased or sold on margin, any market price in the range of trigger prices results in a
margin call (i.e, the investor must pay additional funds into the margin account, the amount of the call
depending on the level to which the margin must be restored). Calculate the range of trigger prices in
each of the following cases:
a An investor purchases 200 shares at price $15 per share, with an initial margin of 60% and a
maintenance margin of 50%.
b
An investor short-sells 100 shares at price $20 per share, with an initial margin of 40% and a
maintenance margin of 25%.
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