Stock price is 60 Initial margin is 40 Maintenance margin is 20 At what price the margin call will b...........

Accountancy (Phase -I & II) Others

Stock price is 60. Initial margin is 40%. Maintenance margin is 20%. At what price the margin call will be triggered?

Rs 45

Rs 36

Rs 24

None of these

Let's analyze the scenario step by step:

- Stock Price (P0): Rs 60

- Initial Margin: 40% (so, equity at the start is 40%, loan is 60%)

- Maintenance Margin: 20% (you must always keep at least 20% equity to avoid a margin call)

- Amount Borrowed: 60% of Rs 60 = Rs 36

- Equity: Rs 24 (your money)

Margin Call Trigger Price (P):

At margin call,

Equity / Stock Value = Maintenance Margin

(P - Loan) / P = 0.20

Plug in the loan:

(P - 36) / P = 0.20

P - 36 = 0.20P

P - 0.20P = 36

0.80P = 36

P = Rs 45

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