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Regulation T is set at 50%. Bubba's account contains long positions in the following securities with the prices listed:
100 ABC $30
200 XYZ $70
200 QBB $40
200 KKK $25
Total market value = $30,000
Debit balance in the account = $12,000
Net equity balance of the account = $18,000
Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120. How much how much value of additional securities must Bubba deposit in lieu of depositing cash?
Suggested Answer: C
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$9,000. Since the required cash to deposit is $4,500 and Reg T is 50%, Bubba may deposit $9,000 of securities.
30 comments · newest first
TA
Tamesha
7 months ago
I feel like it's a lot of math for an exam question!
CR
Craig
7 months ago
Right! 50% of the total purchase price is key here.
IS
Isabella
7 months ago
Remember, he has to cover the new purchases and the margin requirement.
NI
Nida
7 months ago
Why $6,000? I thought it was $9,000.
LA
Laquanda
8 months ago
I think Bubba needs to deposit $6,000.
CR
Craig
8 months ago
This question is tricky! Need to calculate the margin.
KR
Kris
8 months ago
Are you sure about that? I thought it was more.
JA
Jacki
9 months ago
Totally agree, $6,000 makes sense!
BE
Beckie
9 months ago
I think Bubba needs to deposit $6,000.
NO
Nohemi
9 months ago
$3,000? That's like pocket change for Bubba. He should just ask his buddy Cletus to spot him the cash.
DE
Deangelo
9 months ago
$15,000? Yikes, Bubba's gonna need a second job to cover that one.
AR
Aron
9 months ago
$6,000, easy peasy. Bubba's got this, as long as he doesn't try to buy a yacht with the extra securities.
GL
Glory
9 months ago
Regulation T, huh? Sounds like a fancy way of saying "Bubba, you gotta cough up some more cash."
JA
Jade
10 months ago
Hmm, looks like Bubba needs to dig deeper into his pockets. $9,000 should do the trick.
PR
Princess
10 months ago
I feel like I should subtract the debit balance from the total market value to find the net equity, but I'm not completely confident in how that ties into the additional securities needed.
AM
Amira
10 months ago
This question feels similar to one we practiced where we had to determine how much equity was needed for a new purchase. I think I need to calculate the total cost first.
VE
Veronika
10 months ago
I remember something about Regulation T requiring a 50% margin, but I'm not sure how to calculate the additional securities needed.
EU
Eugene
10 months ago
This seems straightforward enough. I just need to plug the numbers into the right formulas and I should be able to get the right answer.
FR
Frederic
10 months ago
I've seen questions like this before. I'm pretty confident I can solve this, but I'll double-check my work to make sure I don't miss anything.
JO
Jose
11 months ago
Okay, let me think this through. I need to calculate the total value of the new purchases and then figure out how much additional collateral is required based on the 50% Regulation T.
GR
Gracie
11 months ago
Regulation T is indeed 50%.
JU
Junita
11 months ago
I think the total cost for the new shares is $15,000, but I'm confused about how that affects the margin requirement.
MI
Minna
11 months ago
Wait, how does that add up? Seems off.
ST
Stephaine
11 months ago
Hmm, this looks tricky. I'm not sure I fully understand how Regulation T and the margin requirements factor in here.
BL
Blossom
12 months ago
I think I can work through this step-by-step, but I'll need to be careful to keep all the numbers straight.
EL
Elly
6 months ago
So, he needs $7,500 in equity for that purchase.
JO
Joanne
6 months ago
Exactly! Regulation T is 50%, so Bubba needs to cover half.
LA
Latonia
6 months ago
Right, and we need to consider the margin requirement.
EL
Elly
7 months ago
DUM is $3,000 and OUT is $12,000. Total is $15,000.
JO
Joanne
7 months ago
Let's break it down. Total cost for DUM and OUT?