Series 7 practice questionhardMargin Accounts — Margin Calls
A client has a long margin position worth $40,000 with a debit balance of $32,000. The maintenance requirement is 25%. How much must the client deposit to meet the margin call?
- A$2,000✓ Correct answer
- B$1,000
- C$3,000
- DNo margin call is required
Explanation
Why A — $2,000
Current equity = $40,000 - $32,000 = $8,000. Equity percentage = $8,000 / $40,000 = 20%, which is below the 25% maintenance requirement. Required equity = 25% x $40,000 = $10,000. Margin call amount = $10,000 - $8,000 = $2,000. The client must deposit $2,000 in cash or marginable securities to bring equity back to the 25% maintenance level.
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