Clarification on Margin Call

[plim2]

Hello,

From the book: 'Secrets of Singapore Property Gurus', part on Smart Property Financing by Dennis Ng, page 86 - Margin Call.

"If'stock prices fall, and the value of your holdings drop from say $1 million to $800K, the banks would call you and ask you to "top up" $140K, to keep the loan to collateral ratio of 70%."

Can anyone explain how is the $140K top up obtained? Thanks.

[Dennis Ng]

Hello,

From the book: 'Secrets of Singapore Property Gurus', part on Smart Property Financing by Dennis Ng, page 86 - Margin Call.

"If'stock prices fall, and the value of your holdings drop from say $1 million to $800K, the banks would call you and ask you to "top up" $140K, to keep the loan to collateral ratio of 70%."

Can anyone explain how is the $140K top up obtained? Thanks.

Hi plim2,
70% financing of S$1 million worth of stocks = S$700,000.

If value drops to S$800,000, 70% of S$800,000 = S$560,000.

Therefore, needs to top up S$140,000.

Hope this clarifies, it's PSLE maths.