Theresa Has a Margin Account with a 70% Initial Margin

question 84

Multiple Choice

Theresa has a margin account with a 70% initial margin requirement and a 35% maintenance margin. What is the maximum dollar amount of stock she can purchase if her cash balance in the account is $27,000?

• A)$9,450.00
• B)$18,900.00
• C)$38,571.43
• D)$58,833.33
• E)$77,142.86

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Definitions:

Fixed Expenses

Costs that do not vary with the level or amount of goods or services produced or sold.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and profits.

Fixed Expenses

Expenses that remain constant regardless of the amount of output or sales within a brief timeframe, including lease payments, wages, and coverage fees.

Break-even Point

The level of production or sales at which total costs equal total revenue, meaning the company neither makes a profit nor incurs a loss.