Buying on Margin: Margin Requirements
Assume that a broker’s margin Information is as follows:
Initial Margin: 50%
Maintenance Margin: 30%
An investor wants to purchases 100 shares of X Corp on margin.
The current price is $30/share
a. How much cash (equity) does he need minimally? How much can he borrow from broker maximally?
b. How far can the stock price fall before a margin call?