The margin requirement on a stock purchase is 25%. you fully use the margin allowed to purchase 100 shares of msft at $25. if the price drops to $22, what is your percentage loss?
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Loss = (22-25)100 = -300
Amount invested = (.25 x 25) * 100 = 625
Return = -300/625 = -48%
The required percentage loss is 48%.
We incur a loss when the selling price of an article is less than the cost price. Thus when (SP) < (CP) then there is a loss.
The given margin requirement is 25%.
The loss per share is,
\(25-22=3.00\)
Total loss is,
\(3\times 100=300.00\)
Amount invested per share is,
\(25\times 0.25=625.00\)
Now, calculating the total return,
\(Return=\frac{Total \ loss}{Total\ amount\ invested} \\=\frac{300}{625} \\=48\%\)
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