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29 June, 22:48

Stephen is purchasing 700 shares of KPT, Inc., stock at a price per share of $20.80. What is the minimum amount the Federal Reserve will require Stephen to pay in cash for this purchase?

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  1. 30 June, 02:26
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    Federal Reserve will require Stephen to pay $7,280 in cash for this purchase

    Explanation:

    There is a legal requirement from the federal that for an investor to deposit 50% cash of the purchase of shares / securities value in the margin account. It is called the margin requirement.

    Purchase Value = Number of shares x Price per share

    Purchase Value = 700 shares x 20.8

    Purchase Value = $14,560

    Inityial Margin Requirement = $14,560 x 50% = $7,280
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