Series 7 practice questionhardMargin Accounts — Short Margin
A short margin account has a credit balance of $75,000. At what market value of the short position will a maintenance margin call be triggered (30% requirement)?
- A$50,000
- B$53,571
- C$57,692✓ Correct answer
- D$60,000
Explanation
Why C — $57,692
A maintenance call triggers when equity drops to 30% of market value. Equity = Credit Balance - Market Value = 30% x Market Value. So: $75,000 - MV = 0.30 x MV. $75,000 = 1.30 x MV. MV = $75,000 / 1.30 = $57,692. At this market value, equity = $75,000 - $57,692 = $17,308, which equals 30% of $57,692. If the short position rises above $57,692, a margin call is triggered.
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