You purchase shares with a market price of $60 using an 80% margin requirement. If the maintenance margin is 30%, before you would have a margin call the market price could fall to? The answer is $17 but I need specific steps on how to solve this

$17

Explanation:

A margin requirement refers to the percentage of marginable securities which an investor is required to pay for using cash from his own pocket. Therefore, the remaining percentage is is a margin loan percentage.

Since margin requirement in the question is 80%, it implies that the remaining 20% is a percentage of margin loan. We therefore have:

Cash payment = $60 × 80% = $48

Margin loan = $60 × 20% = $12

Maintenance margin refers to the the least equity amount an investor must have in his account. Whenever the equity amount falls below the maintenance margin requirement (MMR), there will be a margin call which requires the investor to deposit additional cash.

From the question, the level at which the price could fall to trigger a margin call can be calculated as follows:

Market price level = Margin loan ÷ (1 - MMR) (1)

Where,

MMR = Maintenance margin requirement = 30% = 0.30

Substituting for margin loan and MMR in equation (1), we have:

Market price level = $12 ÷ (1 - 0.30) = $12 ÷ 0.70 = $17.14

Market price level = $17 approximately

Therefore, the market price could fall to $17 approximately before a margin call could be triggered.

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

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