THE GREAT DEPRESSION 1929 1940
THE GREAT DEPRESSION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It is a personal loan from banks with a very low interest rate.
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It is a loan from a commercial bank with a very high interest rate, which is offset by profits from selling the stock.
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It is a loan that allows a person to borrow money to invest, without the person paying the full stock price.
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It was a popular means of investing, after the 1929 stock market crash.
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Detailed explanation-1: -Buying on margin involves getting a loan from your brokerage and using the money from the loan to invest in more securities than you can buy with your available cash. Through margin buying, investors can amplify their returns-but only if their investments outperform the cost of the loan itself.
Detailed explanation-2: -Buying on margin occurs when an investor buys an asset by borrowing the balance from a bank or broker. Buying on margin refers to the initial payment made to the broker for the asset-for example, 10% down and 90% financed. The investor uses the marginable securities in their broker account as collateral.
Detailed explanation-3: -As with any loan, when you buy securities on margin you have to pay back the money you borrow plus interest, which varies by brokerage firm and the amount of the loan.
Detailed explanation-4: -When you buy securities on margin, you are able to leverage the value of securities you already own to increase the size of your investment. This enables you to potentially magnify your returns, assuming the value of your investment rises.