You want to purchase IBM stock at $80 from your broker using as little of your own money as possible.If initial margin is 50% and you have $2,000 to invest, how many shares can you buy?
A)100 shares
B)200 shares
C)50 shares
D)500 shares

Question

Quizplus · Accepted Answer

The initial margin of 50% means that you will need to put up half of the cost of the shares and your broker will loan you the other half. Since you want to purchase IBM stock at $80, you will need to put up 50% of that cost which is $40 per share. With $2,000 to invest, you can calculate how many shares you can buy:
$2,000 / $40 per share = 50 shares.

You Want to Purchase IBM Stock at $80 from Your