Chapter 21, Problem 4CP

Summary Introduction

Adequate information:

The required maintenance margin = $2500

Initial margin posted by Jerry Harris = $6000

Price per July silver futures contract = $28/ounce

Total amount of silver a silver contract includes = 5000 ounces

To construct:

First price per ounce at which Harris would receive a maintenance margin call.

Introduction:

A maintenance margin at 25% means that there must be a minimum amount of equity valued at 25% or more of the total value of the margin account. If one or more securities in the account falls below a certain price and these requirements are not met, the investor receives a margin call, sometimes known as a "fed call."