Liam purchased 500 shares of XYZ Inc. for $30 per share on margin. His initial margin requirement is 50%. If the market price of XYZ Inc. drops to $25 per share, what is the current equity in his account?

Question: Liam purchased 500 shares of XYZ Inc. for $30 per share on margin. His initial margin requirement is 50%. If the market price of XYZ Inc. drops to $25 per share, what is the current equity in his account?

Answer options:

• CAD 12,500
• CAD 7,500 ✅ CAD 5,000
• CAD 2,500

Correct answer: CAD 5,000

Explanation: The current market value of the shares is 500 shares * $25/share = $12,500. The debit balance (loan amount) is 50% of the initial purchase price, which is 50% * (500 shares * $30/share) = $7,500. Equity = Market Value - Debit Balance = $12,500 - $7,500 = $5,000.