Exhibit 4.2
Use the Information Below for the Following Problem(S)
Heidi Talbott has a margin account with a balance of $50,000. The initial margin deposit is 50 percent, and RC Industries is currently selling at $50 per share.
-Refer to Exhibit 4.2.If the maintenance margin is 25 percent,to what price can RC Industries stock price fall before Heidi receives a margin call?
A) $21.75
B) $23.33
C) $32.00
D) $33.33
E) None of the above

Question

Quizplus · Accepted Answer

Margin = (Market Value - Debit Balance)¸ Market Value,where
Debit Balance = initial loan value = ($100,000 - $50,000)= $50,000
Market Value = Price × Number of Shares = 2000P
Thus 0.25 = (2000P - $60,000)¸ (2000P)
P = $33.33

Exhibit 4.2 Use the Information Below for the Following Problem(S)