Explanation

The maintenance margin requirement is calculated as the equity per share divided by the current price per share. Here’s the breakdown:

1. Initial Equity: 30% of $50 = $15.
2. Actual Price: $43.75 (the price at which the margin call occurs).
3. Equity at Margin Call: Initial equity + (Actual price - Initial price) = $15 + ($43.75 - $50) = $15 - $6.25 = $8.75.
4. Maintenance Margin Requirement: Equity at margin call / Actual price = $8.75 / $43.75 = 20%.

• Option A (13%): Incorrect. This option mistakenly uses the relative change in stock price as the margin requirement: ($50 - $43.75) / $50 = 12.5% ≈ 13%.
• Option B (18%): Incorrect. This option divides by the initial price instead of the actual price: ($15 + $43.75 - $50) / $50 = $8.75 / $50 = 17.5% ≈ 18%.
• Option C (20%): Correct. It accurately reflects the maintenance margin requirement as equity per share divided by the current price per share.