The price of Telecom stock has to fall to $71.43 to get a margin call if the maintenance margin is 30%. Assume the price fall happens immediately.
A margin call is issued when the quantity of money in your account equals the maintenance margin.
In this situation, if the price falls below a specific level, you will have less than the maintenance margin to repay the loan.
Because this occurs immediately, there is no need to factor in the interest rate. What we need to do is answer the following equation for "P."
Where P is price.
Maintainenance margin = [tex](Stocks * P) - Loan / Stocks * P[/tex]
Where Stocks is The quantity of stocks purchased (own money + loan
= (15,000(Own)+15,000(loan))/$100/share
= 300 shares
0.3 = [tex](300 * P) - 15000 / 300 * P[/tex]
90P = [tex]300P - 15000[/tex]
15000 = 210P
P = $71.43
Hence, For you to receive a margin call, the stock must fall promptly to $71,43 from $100 (initial value).
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