You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60 percent. What is the highest the stock price can go before you receive a margin call if the maintenance margin is 40 percent?

And if we replace we have this:

So then the highest the stock price can go before you receive a margin call if the maintenance margin is 40 percent is $ 46.86.

See explanation below.

Explanation:

For this case we define the following notation:

N= 500 represent the number of stocks for JAsper

P = 41 represent the stock price

M1 = 60% = 0.6 represent the initial margin

Px represent the highest stock price the variable of interest for this case

M2= 40% or 0.4 represent the mainteneance margin

We can find the value of Px with the following formula on this case:

And if we replace we have this:

So then the highest the stock price can go before you receive a margin call if the maintenance margin is 40 percent is $ 46.86.

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