Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

series 7 take 2 > margin accounts > Flashcards

margin accounts Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 7 Top-off Exam flashcards
1
Q

purpose of a margin account

A

it allows an investor to use some cash and some credit to purchase securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

who regulates the extension of credit in the securities industry?

A

federal reserve board

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what are the eligible marginable securities?

A
  • exchange listed

- OTC nasdaq issues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are the noneligible marginable securities?

A
  • OTC non-nasdaq issues
  • new issues for first 30 days
  • options contracts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

3 forms used for new margin accounts

A
  • credit agreement
  • hypothecation agreement
  • consent to loan agreement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is the credit agreement?

A

required document

-details all margin account requirements and obligations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is the hypothecation agreement?

A

required document

-investor pledges collateral to broker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is the consent to loan agreement?

A

optional document

-allows broker-dealer to lend customer securities to other customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

two sides of regulation T

A

broker-dealer to customer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

two sides of regulation U

A

bank to public or broker-dealer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

regulation t is set by?

A

federal reserve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what percentage required for reg T?

A

50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

minimum maintenance requirement on long account?

A

25%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

minimum maintenance requirement on short account?

A

30%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

to borrow on a margin account, what is the minimum amount of equity required?

A

$2,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

purchase price is less than $2,000, what is required deposit?

A

the purchase price

17
Q

purchase price is between $2,000-$4,000, what is required deposit?

A

$2,000

18
Q

purchase price is greater than $4,000, what is the required deposit?

A

50% of purchase price

19
Q

formula for calculating equity on long margin account?

A

long market value - debit = equity

20
Q

formula for calculating equity on short margin account?

A

credit - short market value = equity

21
Q

formula for calculating equity on combined short and long margin account?

A

long market value - debit + credit - short market value = equity

22
Q

what is the formula for calculating how low a long margin value can fall before a maintenance call?

A

debit / .75

23
Q

what is the formula for calculating how low a short margin value can fall before a maintenance call?

A

credit / 1.30

24
Q

what happens to excess equity in a margin account?

A

equity is above reg T (50%)

-it credits memorandum account (SMA)

25
Q

what happens if a margin account has a restricted status?

A

equity is below reg T (50%)

26
Q

if an account is restricted, how can you buy more securities?

A

you must deposit 50% of new purchase

27
Q

if an account is restricted, what happens if you want to sell securities?

A

if you want to sell in a restricted account, only 50% of sale proceeds can be withdrawn.

28
Q

what happens if there is a maintenance call on a margin account?

A

equity has fallen below minimum maintenance

  • deposit cash (1 X call)
  • deposits (2 X call)
29
Q

SMA on account is increased by?

A
  • excess equity
  • non required deposits
  • sale of stock in restricted account (50% of proceeds credit SMA)
  • if dividends pay interest to account
30
Q

SMA on account is decreased by?

A
  • cash withdrawals

- securities purchased

31
Q

debit balance on margin account is increased by?

A

interest charges

32
Q

debit balance on margin account is decreased by?

A
  • dividends paid on stock
  • interest received on bonds
  • sales proceeds
33
Q

what is the buying power of SMA?

A

2 X SMA

34
Q

what is the loan value of SMA?

A

1 X SMA

35
Q

what is commingling?

A

mixing a customers securities in with accounts of the broker/dealer… not allowed

series 7 take 2 (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions