Series 7 practice questionhardMargin Accounts — Maintenance Margin
A long margin account has a debit balance of $40,000. At what market value will the client receive a maintenance margin call (assuming the 25% minimum)?
- A$50,000
- B$53,333✓ Correct answer
- C$60,000
- D$46,667
Explanation
Why B — $53,333
A maintenance call occurs when equity falls to 25% of market value. At the trigger point: Equity = 25% x MV, and Equity = MV - Debit Balance. So: MV - $40,000 = 0.25 x MV. Solving: 0.75 x MV = $40,000. MV = $40,000 / 0.75 = $53,333. At a market value of $53,333, equity would be $53,333 - $40,000 = $13,333, which is exactly 25% of $53,333. Below this level, a margin call is triggered.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 755+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Information & Recommendations questions
- A client has a long margin position worth $40,000 with a debit balance of $32,000. The maintenance requirement is 25%.…
- The minimum maintenance margin requirement for long positions, as set by FINRA, is:
- In a short margin account, equity is calculated as:
- A long margin account has a market value of $60,000 and a debit balance of $35,000. What is the SMA (Special Memorandum…