g. BABA is a volatile stock and its stock price is expected to fluctuate within ±+50% from its current price level ($20). To avoid getting a marginal call, Jeremy can put more cash into his brokerage account when he first establishes the long position, i.e., his initial margin is larger than the IMR which is at 50%. What is the initial margin such that he will never get a margin call? Assume the price drop happens immediately after he purchases the stock.
g. BABA is a volatile stock and its stock price is expected to fluctuate within ±+50% from its current price level ($20). To avoid getting a marginal call, Jeremy can put more cash into his brokerage account when he first establishes the long position, i.e., his initial margin is larger than the IMR which is at 50%. What is the initial margin such that he will never get a margin call? Assume the price drop happens immediately after he purchases the stock.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 8P
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Question
![g. BABA is a volatile stock and its stock price is expected to fluctuate within ±+50% from its
current price level ($20). To avoid getting a marginal call, Jeremy can put more cash into his
brokerage account when he first establishes the long position, i.e., his initial margin is larger
than the IMR which is at 50%. What is the initial margin such that he will never get a margin
call? Assume the price drop happens immediately after he purchases the stock.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff627e6ed-4a95-4576-bcab-85f20376f7c0%2F6611c434-60c1-48fb-b07d-9b809dff3443%2Fal5ucsf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:g. BABA is a volatile stock and its stock price is expected to fluctuate within ±+50% from its
current price level ($20). To avoid getting a marginal call, Jeremy can put more cash into his
brokerage account when he first establishes the long position, i.e., his initial margin is larger
than the IMR which is at 50%. What is the initial margin such that he will never get a margin
call? Assume the price drop happens immediately after he purchases the stock.
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