Sun Lee Purchased 1,100 Shares of Franklin Metals Stock for $16.80

question 8

Multiple Choice

Sun Lee purchased 1,100 shares of Franklin Metals stock for $16.80 a share. The stock was purchased with an initial margin of 65 percent. The maintenance margin is 30 percent. The stock is currently selling for $17.60 a share. What is the minimum dollar amount of equity that he must have in this stock today to avoid a margin call?

• A) $5,544
• B) $5,621
• C) $5,700
• D) $5,808
• E) $5,973

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Definitions:

Surplus

The situation in which the quantity of a product supplied exceeds the quantity demanded at the current price; often leads to downward pressure on prices.

Shortage

A situation in which the demand for a product or service exceeds the supply available at a specific price.

Bushels

A measure of volume used primarily for agricultural commodities, varying in size depending on the product measured.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell, holding other factors constant.