Inside Traders open a brokerage account and purchases 300 shares of Energy Infusion at $40
Inside Traders open a brokerage account and purchases 300 shares of Energy Infusion at $40 per share.They borrow $4,000 from her broker to help pay for the purchase.The interest rate on the loan is 8%.
1. What is the margin on IT’s account when they first purchase the stock?
2. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account?
3. If the maintenance margin required for the account is 30%, will she receive a margin call?
4. What is the rate of return on her investment?