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At the beginning of the day, you purchased 700 shares of stock for $54.50 a share. The initial margin requirement is 70 percent. Unless otherwise stated, assume that for purchasing the shares your borrowed amount is the maximum allowed borrowing. You are also given that the maintenance margin is 40 percent. What is the maximum percentage decrease that can occur in the stock price before you receive a margin call? Ignore the dividend income, interest payment on the borrowed amount, and the time value of money for this problem.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92794302

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