Guys, sorry for another question…I have a schweser book, with answers but no explanation. Last one today…honestly! ----------------------------------------------------------------------------------------------------------- An investor buys a stock at $32 a share and deposits 50% margin. Assume maintenance margin is 25% Stock pays no dividend and transaction and borrowing costs are zero. Calculate the return on the margin transaction if the stock sold for $37.50 and the price the investor would receive a margin call on the margined position. ------------------------------------------------------------------------------------------------------------- Now return is clear at 34.4% For the maintenance margin I came up with £24 Apparently the answer is $21.33 Now margin is 50%, maintenance is 25%…for an answer to end in $21.33, I would assume that 1/3 of something had to be involved, yet the investor bought a single stock. Please somebody put me out of my misery on this…Thanks!
Make sure you remember this formula: 1-initial margin/1-Maintenance margin *initial price 1-.5/1-.25*32= 21.33
Fantastic!!..Much appreciated!