You buy 100 shares of Apple in a margin account at $150 a share The initial margin is 50% The cost of borrowing is 5% (from your broker) The stock pays a dividend of $2 a share per year The minimum maintenance requirement is 20%
3) What is your ending equity after 1 year?
4) Calculate the price at which you will receive a margin call – base your calculation on the information that is present when you make the purchase – hence at time t=0
