What is the minimum amount of equity

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You have decided to place a market order to buy 8,000 shares of stock ABC at and ask price of $30.00 per share. Your broker offers you a financing fee of 0% annual, your initial margin is 45% and your maintenance margin is 30%.

a) What is the minimum amount of equity required to place the order?

b) Suppose that you hold the 8,000 shares over a year. If the share price one year from now can be either $33.00 or $27.00, compute the return (over equity) one year from now (both scenarios).

c) If the price is $27.00, do you have a margin call?

d) Compute the share price that triggers a margin call.

e) If the share price is $23.57, compute the additional amount of equity required to restore the margin account to the maintenance margin.

Reference no: EM132807189

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