You buy 1000 shares of CTS at $40 a share. Assume the Regulation T rate is...
You buy 1000 shares of CTS at $40 a share. Assume the Regulation
T rate is 50%. You
send $25000 to your broker.
a) Show your account (in line-item Tabular format)
b) What is your buying power?
Homework Answers
a)
| Number of CTS shares purchased | 1,000 |
| Value per share ($) | 40 |
| Total value of shares pruchased ($) | 40,000 |
| Margin requirement (%) | 50% |
| Margin requirement ($) | 20,000 |
| Remaining amount to be bought from cash | 20,000 |
b) Buying power
Your own capital = 25,000
Regulation T rate = 50%
Buying Power = own capital / (1- regulation T rate) = 25,000 / (1-50%) = $50,000
Buying Power = $50,000
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