Sarah Purchased 600 Shares of Detroit Motors Stock at a Price

question 82

Multiple Choice

Sarah purchased 600 shares of Detroit Motors stock at a price of $60 a share.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.The effective interest rate on the margin loan is 6.5 percent.How much margin interest will she pay if she repays the loan in seven months?

• A) $387.29
• B) $404.12
• C) $417.29
• D) $530.42
• E) $647.96

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Definitions:

Private Placement

The offering of securities to a relatively small number of select investors as a way of raising capital.

Flotation Costs

Expenses incurred by a company in issuing new stocks or bonds, including underwriting costs, legal fees, and registration fees.

Oversubscription Option

A clause in an offering agreement that allows the issuer to sell more shares than originally planned if the demand exceeds expectations.

Refunds a Debt Issue

The process where an issuer returns investors' capital for a debt instrument before its maturity, often relating to a callable bond or similar financial product.