chapter 9 Flashcards
how do cash accounts work?
Full cash payment is required before settlement date.
normal settlement date after transaction are as follows:
- Treasury bills same day as transaction
- Government bonds with term of three years or less 2 days
- all other securities 3 days
how does a margin account work?
Investor only pays portion when buying and selling the rest is borrowed from the broker with interest
what is a long position?
Investor buys shares and has ownership
what is a short position?
Investor sell shares they do not own. To close the short position they must buy back the shares and return them to the market
What are free credit balances?
In an investor account cash can be used by broker to conduct business but they must be able to give investor money when asked for
what does margin refer to in regards to a margin account?
margin is the amount an investor must personally provide for buying and selling
what is a margin call?
If the price of a stock drops the investor must pay portion of loan to cover losses
what is excess margin?
if the stock price rises there is excess capital
