A customer has purchased $15,000 in convertible bonds and deposited $7,500. If these bonds increase to $16,200, what is the amount of excess equity in the account?

To determine the amount of excess equity in the account, we first need to understand the relationship between the amounts invested in convertible bonds and the current value of those bonds.

The customer initially purchased convertible bonds worth $15,000 and deposited $7,500. This means that the customer financed half of the investment with their own equity (the deposit) and possibly the remaining amount through borrowed funds or margin accounts.

Now, the value of the bonds has increased to $16,200. To find the excess equity, we calculate the total equity in the account. Equity in a margin account is defined as the current market value of the asset minus any indebtedness that must be repaid.

In this case, the formula for excess equity can be structured as follows:

1. Current value of bonds: $16,200

2. Amount deposited (which serves as the customer’s equity): $7,500

3. The amount the customer can borrow against the bonds: $15,000 - $7,500 = $7,500

From the current value of the bonds, if the customer has borrowed against them, we need to determine how much equity remains after accounting for this value. This means:

• Total value of bonds: $16,