Series 7 practice questioneasyMargin Accounts — Short Margin
In a short margin account, equity is calculated as:
- AMarket value minus credit balance
- BCredit balance minus current market value of the short position✓ Correct answer
- CDebit balance minus market value
- DMarket value plus credit balance
Explanation
Why B — Credit balance minus current market value of the short position
In a short margin account, equity = credit balance minus the current market value of the short position. The credit balance includes the proceeds from the short sale plus the Reg T deposit. For example, if a client shorts $50,000 of stock and deposits $25,000, the credit balance is $75,000. If the stock value stays at $50,000, equity is $75,000 - $50,000 = $25,000.
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