SIE practice questioneasyTypes of Brokerage Accounts
Which of the following types of accounts allows an investor to borrow funds from a broker to purchase securities?
- ACash account
- BCustodial account
- CMargin account✓ Correct answer
- DRetirement account
Explanation
Why C — Margin account
A margin account allows investors to borrow money from the broker to buy securities, using the securities as collateral. Cash accounts do not permit borrowing—the investor must pay the full purchase price. Custodial accounts are managed for the benefit of a minor, and retirement accounts, like IRAs, are tax-advantaged savings vehicles with specific contribution rules but do not permit margin borrowing.
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