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Financial Risk Manager Part 2

Financial Risk Manager Part 2

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A firm purchases 100ofequityattheRegTmarginrequirementof50100 of equity at the Reg T margin requirement of 50%. It invests 100ofequityattheRegTmarginrequirementof5050 of its own funds and borrows 50fromthebroker.Immediatelyfollowingthetrade,itsmarginaccounthas50 from the broker. Immediately following the trade, its margin account has 50fromthebroker.Immediatelyfollowingthetrade,itsmarginaccounthas50 in equity and a $50 loan from the broker (The broker retains custody of the stock as collateral for the loan). If firm leverage is defined, per Malz, as Assets/Equity, then what is the change in the firm's economic balance sheet?

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