Homework Answers
price at which margin call will happen = initial price * (1 - initial margin) / (1 - maintenance margin)
= $89 * (1 - .75)/(1 - .55)
= $89 * .25/.45
= $49.44
Since price fall below the $40 there will be margin call.
Value put by investor = 75% of 89
= $ 66.75
Value as a loan = $89 - 66.75
= $22.25
At the price of $40 value of equity to total value = 40 - 22.25/40
= 17.75/40
= 43.75%
Amount of equity required to maintain = 75% of 40
= $30
thus margin topup will be = $30 - $17.75
= $12.25
thus total margin top up will be = 100 * 12.25
= $1225
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