Problem:
On January 1, 2018, an investor is considering buying 120 shares of MUFC, which current price is $45 per share. The investor sets a margin of 50% and assumes that there are no brokerage costs. Later, on January 1, 2019, due to a very good first half of the premier league season, the stock rises to $55 per share.
What is debit balance in this transaction as of January 1, 2018?
At the initial date, how much equity capital must the investor provide to make this margin transaction?
At January 1, 2019, what is the investor’s new margin position?
If a minimum maintenance margin of 30% is put in place, calculate the margin percentage and show whether the investor would have excess equity, would be restricted, or would be subject to a margin call when the stock price takes the following value:
a.40
b.65
c.30
