Stock can drop before the investor receives margin call

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Reference no: EM131917032

Suppose an investor wants to buy 100 shares at $100/share, that is $10,000 worth of stock. She has $6,000 and finances her investment by borrowing the remaining $4,000 from a broker.

Assuming the maintenance margin is 30%, would a decline in the price to $70, cause a margin call?

What is the minimum price the stock can drop before the investor receives a margin call?

Reference no: EM131917032

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