Lauren has a margin account and deposits $49,994 into it. Assume the prevailing margin requirement is 40%, interest and commisions are ignored, and the Gentry Wine Corporation is selling at $35 per share. a) How many shares can Lauren purchase using the maximum allowable margin? b) What is Lauren's profit (loss) if the price of Gentry's stock       1) rises to $45 and Lauren sells the stock?       2) falls to $25 and Lauren sells the stock? c) If the maintenance margin is 30% to what price can Gentry Wine fall before Lauren will receive a margin call?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Lauren has a margin account and deposits $49,994 into it. Assume the prevailing margin requirement is 40%, interest and commisions are ignored, and the Gentry Wine Corporation is selling at $35 per share.

a) How many shares can Lauren purchase using the maximum allowable margin?

b) What is Lauren's profit (loss) if the price of Gentry's stock

      1) rises to $45 and Lauren sells the stock?

      2) falls to $25 and Lauren sells the stock?

c) If the maintenance margin is 30% to what price can Gentry Wine fall before Lauren will receive a margin call?

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