> Help with investment homework and margins?

Help with investment homework and margins?

Posted at: 2014-12-05 
you borrowed 3000 from the firm for 6000 in stock. so you possess $3000 worth and the firm possesses $3000. Any loss of value will come directly from your assets. The firm will always hold $3000 worth. The maintenance requirement means that your share of the equity in the account must always be greater than 30% of the total value of the account. Here is how I calculated to margin call point

E = your equity % which must be above 30%

X = your equity value

T = total account value

E = X / T

X = T - 3000 (your equity is the total account value - 3000 you owe the firm)

T = total shares (100) * stock price (P)

T = 100p

plug all variables into the first equation

.3 = (100p - 3000) / 100p (break it up into 2 fractions)

.3 = (100p/100p) - (3000/100p)

.3 = 1 - (3000/100p)

.7 = 3000/100p

70p = 3000

p = 42.86

once the share price dips below 42.86, you hold less than 30% equity and the firm could initiate a margin call.