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Margin Call

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Suppose that HP is currently selling at $30 per share. You buy 400 shares using $6500 of your own money and borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 4%. If the maintenance margin is 25%, how low can HP's price fall before you get a margin call?

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Solution Summary

Margin Call is assessed for purchase prices.

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Let the cut off price is P then we should have
Actual Margin = Maintenance Margin
Equity/Asset = (P*No. Of ...

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