Series 7 practice questioneasyMargin Accounts — Regulation T
Under Regulation T, the initial margin requirement for purchasing securities on margin is:
- A25%
- B30%
- C50%✓ Correct answer
- D75%
Explanation
Why C — 50%
Regulation T, established by the Federal Reserve Board, requires investors to deposit at least 50% of the purchase price when buying securities on margin. This means for every dollar of securities purchased, the investor must provide at least 50 cents in equity, with the remaining 50% borrowed from the broker-dealer. Broker-dealers may impose higher requirements (house requirements) but cannot go below 50%.
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