The Account Balance Sheet
You want to buy 1,000 shares of Pfizer (PFE) at a price of $24 per share. You put up $18,000 and borrow the rest. What does your account balance sheet look like? What is your margin?
The 1,000 shares of Pfizer cost $24,000. You supply $18,000, so you must borrow $6,000. The account balance sheet looks like this:
|
Assets |
Liabilities and Account Equity |
||
|
1,000 shares of Pfizer |
$24,000 |
Margin loan |
$6,000 |
|
Account equity |
18,000 |
||
|
Total |
$24,000 |
Total |
$24,000 |
Your margin is the account equity divided by the value of the stock owned:
Margin = $18,000 / $24,000 = .75 or 75 percent