You’ve borrowed $20,000 on margin to buy shares in Ixnay, which i

now selling at $40 per share. Your account starts at the initial marg
requirement of 50%. The maintenance margin is 35%. Two days late
the stock price falls to $35 per share.
a. Will you receive a margin call?
b. How low can the price of Ixnay shares fall before you receive a
margin call?

Borrowed funds $ 20,000

Price per share $ 40.00
Initial margin 50%
Maintenance margin 35%
New stock price $ 35.00

Solution

a. Total investment $ 40,000

Shares purchased 1,000
New value $ 35,000
Equity value $ 15,000
Margin 42.86%

b. Margin call price $ 30.77

es in Ixnay, which is
at the initial margin
35%. Two days later,

re you receive a