- Jacob opens a margin account and deposits $4,000 of cash.
What is the value of Jacob’s buying power?
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- What is the value of Jacob’s equity?
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- Jacob buys 400 shares of a stock at $20 per share. Suppose the value of Jacob’s stock rises to $30 a share. What is the market value of the Jacob’s stocks?
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- If Jacob sold all his stocks and closed the account, how much
money would he have?
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- How much did Jacob gain from his
original deposit of $4,000? How much
was this gain as a percentage of his
original deposit?
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- Suppose instead of rising to $30 a share, Jacob’s stock falls to $15 a share. Now what is the market value of Jacob’s stocks?
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- If the stocks fall to $15 per share, what is the value of Jacob’s equity?
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- Suppose instead of falling by $5 a share, Jacob’s stock sinks by $10 a share – to only $10.
What is the market value of Jacob’s stocks?
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- At $10 per share, what is the value of Jacob’s equity?
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- Jacob’s broker has a maintenance margin requirement of 30%, yet in no case can equity fall below the minimum of $2,000. When the price per share fall to $10, do you think his broker would send him a margin call? Explain.
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