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Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $20 per share. She borrows $2,500 from her broker to help pay for the purchase. The interest rate on the loan is 7%. a. What is the margin in Dée’s account when she first purchases the stock?

Respuesta :

Answer: $5500

Explanation:

The margin in Dée’s account when she first purchases the stock will be calculated thus:

First, we calculate the value of the 400 shares which will be:

= 400 × $20

= $8000

Since the borrowed amount is $2500, therefore the margin will be:

= Purchase price - Borrowed amount

= $8000 - $2500

= $5500

Therefore, the margin is $5500