HISTORY
THE WORLD BETWEEN THE WARS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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buying stocks on credit
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paying too much for a stock on the stock market
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buying stocks at a low price and selling at a high price
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it is a cross between capitalism and communism
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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: -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. Margin interest rates are typically lower than those on credit cards and unsecured personal loans.
Detailed explanation-3: -Example of Margin Let’s say that you deposit $10, 000 in your margin account. Because you put up 50% of the purchase price, this means you have $20, 000 worth of buying power. Then, if you buy $5, 000 worth of stock, you still have $15, 000 in buying power remaining.
Detailed explanation-4: -Buying stocks on margin refers to borrowing money to purchase stock shares and securities. Trading on margin allows investors to use leverage to maintain or boost their position. Trading on margin involves risk because it requires traders to pay the money back to the broker.
Detailed explanation-5: -You’ll have more buying power Margin investing allows you to have more assets available in your account to buy marginable securities. Your buying power consists of your money available to trade in your account, plus the amount that can be borrowed against securities held in your margin account.