Margin Account Assignment
February 18th, 2020
An investor is trading on a margin account that has an initial margin requirement of 30% and maintenance margin requirement of 25%. She bought 1,500 shares at $11 each. The interest rate on the margin account is 7.99% and there is a flat $8.99 commission on every trade (buy or sell)
a) If the price moves to $12, calculate the new margin (ignore interest). (3 marks)
b) If the price drops to $8, will the investor get a margin call? How much cash she needs to deposit (ignore interest)? (3 marks)
c) After 6-months she sold all those shares at $13 each. She also received $0.21 dividends per share within this timeframe. Calculate her annualized levered return (include interest and commissions). (4 marks)Get Finance homework help today