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1.    You just opened a margin account with a local brokerage firm. The initial margin is 60% and the

maintenance margin is 30%. You bought 500 shares of TRH at $50 per share on the margin.

 

a)    What are the initial equity position and loan balance?

b)    How far can the price go down before you receive a margin call?

c)    If the price dropped suddenly to $20. How much cash should be added to the account to restore the margin?

d)    If the price declined to $24, how many shares must be sold to restore the maintenance margin (ignore the contribution of part c)?

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