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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purchasing stock and hoping to sell it quickly
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Buying stock with little (or no) money down
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misrepresenting how much a money earned in profits
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owning stock in many different companies
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Detailed explanation-1: -Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you’d be able to normally.
Detailed explanation-2: -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-3: -To buy stocks on margin, a margin account must be opened and approval obtained for the loan. If the stock’s price rises, the investor can sell the stock, repay the loan, and keep the profit. If the stock’s price falls, the broker may issue a margin call, requiring more cash or selling the stock.
Detailed explanation-4: -While margin loans can be useful and convenient, they are by no means risk free. Margin borrowing comes with all the hazards that accompany any type of debt-including interest payments and reduced flexibility for future income. The primary dangers of trading on margin are leverage risk and margin call risk.
Detailed explanation-5: -In buying on margin, cash is borrowed to help buy securities (a financial investment like stocks or bonds). In short selling, the shares themselves are borrowed and sold. Then, new shares are purchased to pay back the borrowed ones, hopefully, if and when the stock price drops.