SIE practice questioneasyAccount Types: Cash vs Margin Accounts
Which of the following statements BEST describes a margin account?
- AIt is limited to only government securities trading.
- BIt allows investors to borrow funds from a broker to purchase securities.✓ Correct answer
- CIt requires all purchases to be paid in full upfront.
- DIt can only be opened by institutional investors.
Explanation
Why B — It allows investors to borrow funds from a broker to purchase securities.
A margin account allows investors to borrow money from a broker to buy securities, creating leverage. A cash account requires full payment, and margin accounts are not limited to government securities or institutional investors.
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