Ask Question
BusinessBusiness
23 July, 01:05

Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30

+3
Answers (1)
  1. 23 July, 01:24
    0
    The price at which a margin call would be received is $28.929.

    Explanation:

    The stated question does not contain complete information. The remaining information is as follows.

    Assume that you purchase 150 shares of RossCorp stock at $45 each by making a margin deposit of 55 percent. At what price would you receive a margin call?

    The price is calculated using the formula for maintenance margin as follows.

    Maintenance margin = Equity in account / Value of stock

    Equity in account = (Shares purchased x Call price) - (Shares purchased x Remaining ratio x Sale price)

    Equity in account = (150 x P) - (150 x 0.45 x 45)

    = 150P - 3037.5

    Value of stock = Shares purchased x Call price

    = 150P

    Inserting these values into the formula for maintenance margin:

    0.3 = (150P - 3037.5) / 150P

    45P = 150P - 3037.5

    105P = 3037.5

    P = 28.929

    Hence, the price at which a margin call would be received is $28.929.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
The following information for the past year for the Blaine Corporation has been provided: Fixed costs: Manufacturing $115,000 Marketing 21,000 Administrative 16,000 Variable costs: Manufacturing $114,000 Marketing 23,000 Administrative 34,000 During
Answers (1)
If the reserve ratio is 15 percent, the money multiplier is
Answers (1)
Baylor service corp. redeemed $1,000 of gift cards that customers used to pay for services that were performed by the company. the related adjusting entry would include a debit to:
Answers (1)
Identify three types of business or professional organizations?
Answers (2)
Which of the following terms is correct? a. Economic profit takes into account all costs involved in producing a product. b. Economic profit always exceeds accounting profit. c.
Answers (1)
New Questions in Business
Choose all that apply. Select sources of income. A) interest deposited into your savings account B) wages from your job C) commission for a sale D) a rent check from someone renting a property you own
Answers (2)
A company has two departments and allocates all overhead costs based on department revenues. The following information applies: Department 1 revenue $1,000,000 Department 2 revenue 1,500,000 Corporate overhead costs 250,000 Department overhead costs
Answers (1)
The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be: Multiple Choice An equal amount of cost for each department. Number of customers to enter each department.
Answers (1)
What happens when a bond becomes due? A The issuer will pay you back, minus interest. B The issuer will pay you back, plus interest. C You pay it back to the issuer, plus interest. D You pay it back to the issuer, minus interest.
Answers (2)
The emphasis of a marketing strategy for a continuous innovation concentrates on
Answers (1)
Home » Business » Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per year. The maintenance margin is 30
Sign Up Forgot Password?