I’m a bit confused of how precise we need to be on these calculations. Reading 52 Problem Practice 1 Vol. 5 p. 37 Lauren has a margin acc. and deposits $50,000. Assuming the prevailing margin requirement is 40%, commissions are ignored, and the Gentry Shoe Corp. is selling at $35 per share. A. How many shares can Lauren purchase using the max allowable margin? B. What is Lauren’s profit/loss if the price of Gentry’s stock i) rises to $45? ii) falls to $25? Ok. As regards for A, we can get the max allowable margin as $50,000/40% = $125,000 Then the number of shares purchased by the max margin would be: $125,000/$35 = 3571 (rounded) Given the information, Lauren’s own money invested is $50,000. Since the max allowable margin is $125,000, thus the loan is $75,000. Yet, on errata, it says the investor would not try to purchase fractional shares in this situation… Consequently, the investor borrows $74,985 instead of 75,000. Why the errata thinks $74,985 is the more accurate way??? I would calculate B as below which I think is more accurate: B. i) stock price rises to $45 Lauren’s Profit = $45x($125,000/$35) - $125,000 = $125,000 x 2/7 = $35,714 ii) stock price falls to $25 Lauren’s Loss = $25x($125,000/$35) - $125,000 = - $125,000 x 2/7 = - $35,714 By the way, the errata’s corrected answers are $35,710 and - $35,710 respectively. So what’s your comment on this? Thanks much.