Answer:
C) $5,000
Explanation:
Since the price of the stocks first rose to $50, the account's equity was $50,000.
The SMA balance was = ($50,000 x 1/2) - $20,000 = $,5000
The SMA balance acts like a stabilizer and cannot be taken away even if the price of the stocks fall slightly. The price of stocks must fall 25% in order for the SMA to be withdrawn.
The investor's equity decreased = equity - margin requirement = $39,000 - $20,000 = $19,000, but the amount that the investor can borrow (SMA balance) will remain the same at $5,000.
