Solved by Expert Tutors
Australia Margin Lending Question Max uses $30,000 of his own funds and borrows additional funds to buy a total of $60,000 worth of shares.
Solved by Expert Tutors
Question

AustraliaMargin LendingQuestiona.     What is the current Loan to Valuation Ratio?

Max uses $30,000 of his own funds and borrows additional funds to buy a total of $60,000 worth of shares. Under the terms of Max's margin lending arrangement, a margin call will be triggered when the Loan to Valuation Ratio exceeds 70%.

b.    If you are told the Loan to Valuation Ratio is now 70%, has the share investment value increased or decreased?




c.    If you are told the Loan to Valuation Ratio is now 70% what is the equity proportion of the investment?




The margin lending contract specifies that a margin call will be made if the Loan to Valuation Ratio exceeds 70%.

d.    For that margin call to be triggered, the value of the investment will have to fall. What will the value of the total investment have to fall to for a margin call to be made?

Step-by-step answer

The student who asked this found it Helpful

or nec facilisis.acinia pulvi

1.jpg

ec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit ame

1.jpg
rem ipsum dolor sit amet, consectet trices ac magna. F ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesq et, consectetur adipiscing elit.

Subscribe to view the full answer

Subject: Business, Finance

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Let our 24/7 Finance tutors help you get unstuck! Ask your first question.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes