Lauren has a margin account and deposits $49,994 into it. Assume the prevailing margin requirement is 40%, interest and commisions are ignored, and the Gentry Wine Corporation is selling at $35 per share.
a) How many shares 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 and Lauren sells the stock?
2) falls to $25 and Lauren sells the stock?
c) If the maintenance margin is 30% to what price can Gentry Wine fall before Lauren will receive a margin call?
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