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Zorluk: ZorMargin Accounts and Borrowing Requirements

An investor opens a margin account and executes a first-time transaction purchasing 120120 shares of ABC common stock at $45\$45 per share. If the investor elects to satisfy the initial Regulation T margin requirement by depositing fully paid marginable securities instead of cash, what is the minimum total market value (in dollars) of securities that must be deposited?

Cevap: 5400 $

Cevap

$5,400 in fully paid marginable securities
The total purchase amount is 120×$45=$5,400120 \times \$45 = \$5,400. Under Federal Reserve Regulation T, the initial margin requirement is 50%, which equals 0.50×$5,400=$2,7000.50 \times \$5,400 = \$2,700 in cash. If an investor chooses to deposit fully paid marginable securities instead of cash, those securities are valued at their loan value of 50%. Consequently, to meet a 2,700cashmargincall,theinvestormustdepositsecuritieswithamarketvalueequaltotwicethecashrequirement(2,700 cash margin call, the investor must deposit securities with a market value equal to twice the cash requirement ( 2 \times \2,700=$5,4002,700 = \$5,400).

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1
Calculate the total purchase cost of the transaction.
120 shares×$45/share=$5,400120 \text{ shares} \times \$45\text{/share} = \$5,400
Determining the total transaction size establishes the baseline for Regulation T calculations.
2
Calculate the initial Regulation T cash margin requirement.
50%×$5,400=$2,70050\% \times \$5,400 = \$2,700
Federal Reserve Board Regulation T requires an initial equity deposit of 50% of the purchase value for long stock positions.
3
Determine the required value of marginable securities needed to satisfy the cash call.
$2,7000.50=$5,400\frac{\$2,700}{0.50} = \$5,400
Marginable securities deposited to satisfy a margin call only provide 50% of their market value in loan value/equity. Therefore, an investor must deposit securities equal to twice (200%) the required cash amount.

Anahtar Kavram

Satisfying Regulation T Initial Margin Requirements with Securities
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Konular

Margin Accounts and Borrowing Requirements