# Margin req.

An investor purchased 550 shares of Akley common stock for \$38,500 in a margin account and posted initial margin of 50% of this amount. The maintenance margin requirement is 35%. If the price of Akley falls to \$52 per share, the investor: A. is not required to deposit more equity to maintain the long 550 share position. B. must deposit \$9,900 to meet the resulting margin call. e. must deposit \$5,775 to meet the resulting margin call. D. must deposit \$660 to meet the resulting margin call. As per the ans. given in Schewser is : D The investor has borrowed 0.508,5(0) = 19,250. When the price falls to \$52, the investor has an equity balance of 52(550) - ]9,250 = 9,350. Maintenance margin is 52(550)(0.35) = 10,010 and the margin call will be for 10,010 - 9,350 = \$660. I htink the ans should be B. 9900. Reason : when there is a margin call the variation margin is to bring it to the initial margin level and not to the maintenance margin level. Correct me if i m wrong.

You have to deposit enough to reinstate the maintenance margin, not the initial margin (you buy stock, not futures). Letâ€™s work at stock price level, is simpler. So the initial price paid for a share was 38,500/550=\$70. You had to deposit 50% margin, that is \$35 for each share bought. The stock drops to 52, that is a loss 70-52=\$18 per share. This amount is deducted (marked to market) and reduces the initial deposit made from \$35 to \$17 for each share. You are required to have in your account at least 35% of the current share price per each share, that is 35%*\$52=\$18.2 for each share bought. But you have only \$17. You will get a call to bring the margin account to the required \$18.2 per each share bought, this would be a call for a total of (\$18.2-\$17)*550 shares=\$660.