• Jan 21st 2009, 01:27 PM
kdogg121
Hello, I have a simple question (I hope!) with regard to a concept in investment management called "Maintenance Margin" I won't explain the theory, I just need to know how the equation is computed. Here it is:

(100P-4,000) / 100P = .30

The P will represent the stock price in which to make a margin call, and the answer should be $57.14 I just don't understand how the problem was computed. I tried multiplying both sides of the equation by 100P, to get rid of the fraction, but this does not seem to work. Please help, thanks! • Jan 21st 2009, 02:07 PM masters Quote: Originally Posted by kdogg121 Hello, I have a simple question (I hope!) with regard to a concept in investment management called "Maintenance Margin" I won't explain the theory, I just need to know how the equation is computed. Here it is: (100P-4,000) / 100P = .30 The P will represent the stock price in which to make a margin call, and the answer should be$57.14 I just don't understand how the problem was computed. I tried multiplying both sides of the equation by 100P, to get rid of the fraction, but this does not seem to work. Please help, thanks!

Hi kdogg121,

Your approach to the problem is correct.

Multiply both sides by 100P.

$\displaystyle \frac{100P-4000}{100P}=.30$

$\displaystyle 100P-4000=30P$

Now subtract 30P from both sides.

$\displaystyle 70P-4000=0$

Next, add 4000 to each side.

$\displaystyle 70P=4000$

Finally, divide both sides by 70 to find $\displaystyle P=57.14$
• Jan 21st 2009, 02:07 PM
ursa
Quote:

Hello, I have a simple question (I hope!) with regard to a concept in investment management called "Maintenance Margin" I won't explain the theory, I just need to know how the equation is computed. Here it is:

(100P-4,000) / 100P = .30

The P will represent the stock price in which to make a margin call, and the answer should be $57.14 I just don't understand how the problem was computed. I tried multiplying both sides of the equation by 100P, to get rid of the fraction, but this does not seem to work. Please help, thanks! hi I am sorry but I don't understand what you want???? if you want P=$57.14, then it is coming from the equation, simple calculation
if you have any other doubt please be specific