You purchased 100 shares of XON common stock on margin at $60 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.
A. $42.86
B. $50.75
C. $49.67
D. $80.34
A. $42.86
100 shares × $60 × 0.5 = $6,000 × 0.5 = $3,000 (loan amount); 0.30 = (100P $3,000)/100P; 30 – P = 100P – $3,000; –70P = –$3,000; P = $42.86.
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