(Answered) Lauren has a margin account and deposits 50000 assuming the

Management Studies

Lauren has a margin account and deposits $50,000. Assuming the prevailing margin requirement is 40 percent, commissions are ignored, and The Gentry Shoe Corporation is selling at $35 per share:

a. How many shares of Gentry Shoe can Lauren purchase using the maximum allowable margin?

b. What is Lauren's profit (loss) if the price of Gentry's stock

(1) Rises to $45?

(2) Falls to $25?

c. If the maintenance margin is 30 percent, to what price can Gentry Shoe fall before Lauren will receive a margin call?

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