Margin Accounts: Introduction

Question 1

Introduction to Margin Accounts:
Customers can open different types of accounts at a broker-dealer. In a
cash account, a customer must deposit 100% of the purchase price of a security.

Question 2

Introduction to Margin Accounts:
A margin account allows a customer to borrow either money or securities from a broker-dealer.

Question 3

Introduction to Margin Accounts:
The rules for both cash and margin accounts are governed by the Federal Reserve under Regulation T (Reg T).

Question 4

Introduction to Margin Accounts:
In addition to Regulation T (Reg T). There are also additional Financial Industry Regulatory Authority (FINRA) requirements for the opening and maintenance of margin accounts.

Question 5

Introduction to Margin Accounts:
A customer opens a margin account in order to borrow cash or securities
from a broker-dealer. By borrowing, the investor is using leverage.

Question 6

Introduction to Margin Accounts:
Leverage can provide greater returns but can also result in greater losses.

Question 7

Introduction to Margin Accounts: Risks and returns are lower in a cash
account, (than a margin account) where the customer does not borrow money.

Question 8

Introduction to Margin Accounts: Risks and returns are lower in a cash
account, (than a margin account) where the customer does not borrow money.