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Compute the return on investment

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Question - You have borrowed $26,000 on margin to buy shares in Bubble Dot Company, which is now selling at $50 per share. Your account starts at the initial margin requirement of 60%. The maintenance margin is 35%. Two days later, the stock price falls to $47 per share. The margin account does not charge any interest.

(a) Compute the return on investment?

(b) Will you receive margin call?

(c) How low can the price of Bubble Dot Company shares fall before you receive a margin call?

Reference no: EM133158448

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