You want to buy shares of Delta stock which is selling for $19 a share. Your...
You want to buy shares of Delta stock which is selling for $19 a share. Your margin account currently has available cash of $4,800. What is the maximum number of shares you can purchase if the initial margin requirement is 70%?
Homework Answers
| Solution: | ||||
| Maximum number of shares you can purchase | 360 shares | |||
| Working notes: | ||||
| Initial margin is required = 70% | ||||
| Currently amount in account = $4,800 | ||||
| Amount of share that can be purchased = Amount in margin account/Margin required rate | ||||
| =$4,800/70% | ||||
| =6,857.142857 | ||||
| Maximum number of shares you can purchase | ||||
| = Amount of share that can be purchased/ Current selling price | ||||
| = 6,857.142857/$19 | ||||
| = 360.9022556 | ||||
| [rounded down to last full shares] | ||||
| full shares that can be bought is 360 shares | ||||
| Hence | Maximum number of shares you can purchase | 360 shares | ||
| Please feel free to ask if anything about above solution in comment section of the question. | ||||
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