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17 Cards in this Set
- Front
- Back
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Total Equity Question
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You have a customer that has: LMV = Debit + Equity = 120,000 debit= 40,000 (Interest is paid on debit balance) SMV= Credit - Equity = 160,000 credit =260,000 (but can be off set by credit balance THE CREDIT BALANCE EXCEEDS THE DEBIT BALANCE NO INTEREST IS CHARGED |
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The Margin Formula (LMV & SMV)
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SMV = Cr - Equity |
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Total Equity Calculation LMV - 160,000 = 60,000 + _______ SMV = 50,000 = 40,000 - _________ Total |
LMV = E = 100,000 SMV = E = -10,000 Total 90,000 |
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In a Long account (Market Value) |
As market value rises, Equity Rises As Market value falls, Equity Falls |
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In a Short account (Market Value) |
As market value rises, Equity decreases As Market value falls, Equity increases |
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SMA Steps |
SMA is also referred to as excess equity / or the amount the equity exceeds Reg T of the MV (for test it is 50%) Find Equity Find The Reg T Mkt value Subtract Reg T Amount from the Equity
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LMV = 90,000 DR = 30,000 SMV = 80,000 CR = 150,000 |
90,000 = 30,000 + 60,000 45-60 = 15 80,000 = 150,000 - 70,000 40-70 = 30 SMA = 45,000 |
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SMA = you don't lose it..... & Affect |
until you use it Increase -Long account- when mkt value increases When selling stock When cash dividends and interest are received Short account-when mkt value increases Stock is sold Cash dividends are paid to the acct |
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The SMA in a short account increases when
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The market value falls
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Using SMA
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Can use for any reason including Purchase more stock and even purchase options
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Purchasing Power
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If purchasing stock can buy twice as much stock as there is in SMA (called buying power) |
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Minimum Maintenance Requirement |
The very least amount of Equity that an account can have based on keeping the mkt value the same but taking a loan from a broker dealer Long acct: LMV X 25% Short acct: SMV X 30% |
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Minimum Maintenance Shows
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Compare what the equity is to what it should be How Long can the equity go? |
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Maintenance Margin Call Occurs when |
The mkt is moving against the client and the mkt value is getting to close to the balance in the account (debit or credit) and causes the equity to go below the minimum maintenance level |
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Maintenance Margin Call |
LM = DR / 75% SM = CR / 130% |
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Margin Call can be used in three different ways
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Reg T Margin Call - client is buying or shorting Reg 50% / Intial When will there be a margin maintenance call? Divide What is the margin call? Multiply |
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Mark to the Market
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Occurs for margin accounts only not for accrued interest S firm Marks to the market daily |
