Unit 6: Margin Accounts Flashcards
Through________ accounts, investors can borrow money from brokerage firms by pledging collateral
margin
The ____________regulates margin transactions
Federal Reserve Board
__________ are required to impose initial maintenance requirements on all margin accounts.
Broker-dealers
In this type of margin account, customers purchase securities and pay interest on the money borrowed until the loan is repaid
Long margin accounts
In this type of account, stock is borrowed and then sold short, enabling the customer to profit if its value declines.
Short margin accounts
Regulation T – customers must deposit a min of ______% of the market value of the transaction within five business days.
50%
Initial Requirements – the customer is required to deposit the greater of Regulation T requirement or the FINRA minimum. The exception occurs when the customer’s initial purchase is less than $2,000; the customer is not required to deposit $2,000, only _____________.
the full purchase price.
If the customer’s first purchase in a margin account is less than $2,000, deposit ________ of the purchase price.
100%
If the first purchase is between $2,000 - $4,000, deposit __________.
$2,000
If the first purchase is greater than $4,000, deposit ______%.
50%.
The practice of recalculating to check the status of the equity is the account is called _________.
marking to the market
Long margin accounting: when money is paid into a margin account, the debit balance is________, and the equity is_________.
decreased;
increased
In a Long Margin Account, Minimum Maintenance -s _____% of LMV
25%
When the market value of securities goes up or down, the ______ does not change.
Debit (DR)
The interest paid by margin customers on money borrowed is a variable rate based on the ______ ______ rate.
broker call rate
Regulation T applies to both cash and margin accounts; customers have _______ business days to pay for the purchase regardless of the account type. Firms, however, expect payment the regular way: within _____ business days of trading.
four;
two
If an account falls below minimum, a_____________ call will be sent in an amount sufficient to bring the account back up to minimum.
maintenance
A rule to determine SMA (Special Memorandum Account) is as follows: for every $___ increase in market value, $____of SMA is created. In the previous example, market value increased by $20,000, which created SMA of $10,000.
$1;
$.50
The amount of SMA in the account is equal to the greater of the _____ ______or the amount already in SMA.
excess equity
SMA may be more than excess equity and may exist even if there is no excess equity in the account. SMA is_______ power.
buying
If a customer wants to remove cash dividends coming into his margin account, he must do so within _____ days of receipt. Otherwise, the cash dividend will be applied against the debit balance, thereby increasing the equity in the account.
30
If securities are sold in a restricted account, which of the following are affected? LMV, DR, EQ, SMA?
All but equity are affected. LMV, DR, SMA. Equity is affected only if the customer elects to remove half of the proceeds.
The amount of equity that must be deposited to buy securities
Margin
Securities that can be used as collateral in a margin account.
Marginable
