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Assume an investor buys 10,000 share of common stock of PQ Company at Tk. 100 from his broker, where he has to put up Tk. 5,00,000 to initiate the transaction. You are required to calculate :(i) The initial margin.(ii) The actual margin when the share price drops to Tk. 90 per share. Does the investor need to satisfy a margin call if the maintenance margin is 30%?

January 24, 2025 admin Other 0

Given Data:

  • Number of shares purchased = 10,000 shares
  • Purchase price per share = Tk. 100
  • Total cost of shares = 10,000×100=10,000 \times 100 =10,000×100= Tk. 10,00,000
  • Investor’s own capital (equity) = Tk. 5,00,000
  • Maintenance margin requirement = 30%
  • New share price = Tk. 90

(i) Calculation of the Initial Margin: