1. You buy 100 shares of MSFT stock at $38/share, in a 60% initial margin account with a maintenance margin of 50%.
a. What is the debit balance (borrowed money) in the account?
b. How much equity did the investor provide?
c. If the stock price goes down to $25/share, what is the new margin position?
d. What amount of cash must be deposited to satisfy margin call?
e. If you are unable to provide cash and the broker decides to sell the equity at $25/share to satisfy the margin call, what amount of stock would be sold?
2. You buy 100 shares of XYZ stock at $45/share, in a 60% margin account.
a. What is the debit balance (borrowed money) in the account?
b. How much equity did the investor provide?
c. If the stock price rises to $65/share, what is the new margin position?
d. What amount of stock can you sell and withdraw the cash to maintain 60% margin position?
e. If the stock price remains at $65/share, and you chose to buy more stock rather than d. above, how much more stock can you buy to maintain exactly 60% margin position?