Series 7 practice questioneasyMargin Accounts — Long Margin
In a long margin account, equity is calculated as:
- AMarket value plus debit balance
- BMarket value minus debit balance✓ Correct answer
- CDebit balance minus market value
- DMarket value divided by debit balance
Explanation
Why B — Market value minus debit balance
In a long margin account, equity equals the current market value of the securities minus the debit balance (the amount borrowed from the broker). For example, if securities are worth $100,000 and the debit balance is $50,000, the equity is $50,000. The debit balance represents the margin loan, which the investor must eventually repay plus interest.
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