Margin Accounts Min Maint Review Questions

G3J66-9K7MQ In this question explanation I’m feeling really confused compared to what the text formulas were. Is there something wrong in this explanation/answer?

2 Likes

Hi @Jen!

First, thanks for using the Achievable forum. Glad to have you here!

I’ll first give you a short answer, but I’ll go through the ins and outs of this question in a video that I’ll post later today. The short answer - minimum maintenance can always be found by multiplying the current market value of the stock by the appropriate maintenance requirement.

The SMV of the account fell to $40,500. Short accounts have a 30% minimum maintenance requirement. Therefore, the minimum maintenance margin is $40,500 x 30% = $12,150

You use the same process for a long margin account, but instead multiply the LMV by 25%. Keep an eye out for the video I post later - I’ll fill in all the additional context then.

1 Like

Here’s the video, as promised:

To @Jen or anyone else seeing this - please let me know if you have any questions.

2 Likes

Thanks for that video that was very helpful! But on the example question I was asking about and the example you showed, both are about SMV until the very last line of the explanations which call it LMV. Is that the way those lines should read? I was thinking it should be SMV there as well instead of LMV at the very end unless I’m confused about that…which is possible!

1 Like

Oh, yes - where it says LMV at the end of the explanation, that should be SMV. We’ll update that immediately. I hope that answers it!

2 Likes