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Homework answers / question archive / Josh Warner has a margin account and deposits $25,000 (the cash amount)
Josh Warner has a margin account and deposits $25,000 (the cash amount). If the initial margin deposit is 40 percent, and JC Industries is currently selling at $25 per share:
How many shares of JC can Josh buy? What is Josh's profit ($) if JC's price rises to $42?
Computation of the number of shares:-
Number of shares = Cash amount / (Initial margin * Price per share)
= $25,000 / (40% * 25)
= 2,500 shares
Computation of the profit:-
Profit = Number of shares * (Final price - Initial price)
= 2,500 * ($42 - $25)
= 2,500 * $17
= $42,500
