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Determining the initial deposit amount

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A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is 60% and the maintenance margin is 30%. How much money does the trader have to provide initially? What share price is there a margin call?

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Solution Summary

The solution determines the money that trader needs to deposit initially. It also calculate the price at which he is likely to get a margin call.

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Initial margin=60%

Amount paid initially=200*20*60%=$2400
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Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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