When the price is $21 she has $6,300 of stock against which she borrowed $4,600 so her margin is 73%. Yes she will get a margin call. In fact if the margin is 30% she would not be able to borrow $4,600 in the first place.
The price went from $32, to $21, which is a drop of $11, so $11/$32 = -34.4%.
But she lost $3,300 on her investment of $5,000 which is a -66% loss. That does not include interest which makes the loss greater.
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $32 per share. She borrows $4,600 from her broker to help pay for the purchase. The interest rate on the loan is 6%.
a. What is the margin in Dée’s account when she first purchases the stock?
Margin $
b-1.
If the share price falls to $21 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.)
Remaining margin %
b-2. If the maintenance margin requirement is 30%, will she receive a margin call?
No
Yes
c.
What is the rate of return on her investment? (Negative value should be indicated by a minus sign.Round your answer to 2 decimal places.)
Rate of return %
