You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. The maintenance margin is 30%.•How far does the price of Telecom stock have to fall for you to get a margin call?•If the price falls to $40 per share, will you receive a margin call?
You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. The maintenance margin is 30%.•How far does the price of Telecom stock have to fall for you to get a margin call?•If the price falls to $40 per share, will you receive a margin call?
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
Problem 1PS
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You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. The maintenance margin is 30%.•How far does the price of Telecom stock have to fall for you to get a margin call?•If the price falls to $40 per share, will you receive a margin call?
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