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Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry.

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Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions 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 i. rises to $45? ii. falls to $25?

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

 
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