THE GREAT DEPRESSION 1929 1940
THE GREAT DEPRESSION
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
taking a loan from a broker and actually paying for only a portion of the stock.
|
|
|
buying stock at a cheap price and selling it at a high price
|
|
|
buying stock on the “black market” from an unlicensed broker
|
|
|
taking a loss on a stock and writing it off on your taxes
|
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: -Margin calls are demands for additional capital or securities to bring a margin account up to the maintenance requirement. Brokers may force a trader to sell assets, regardless of the market price, to meet the margin call if the trader doesn’t deposit funds.