Your brokerage has an initial margin of 60%, a maintenance margin of 40%, and a broker's call money rate of 4%. You depost $6,600 into your account, and are seeking to purchase as many shares as possible of Echsrop Company, which is currently trading at $20.00. Assume that after one year, the price of Echsrop Company is $12.33.
1) What is your rate of return on the margin position one year after purchasing the shares?
a) -38.35%
b) -46.19%
c) -51.62%
d) -66.58%
2) If after one year the price of Echsrop Company is $12.33, then you will receive a margin call. How much would you need to deposit into your account in order to reach the maintenance margin level, and keep the margin position alive?
a. $516.10
b) $507.10
c) $331.10
d) $325.10