SIE practice questioneasyCash vs. Margin Accounts
Which statement is true regarding a margin account?
- AThe customer may borrow funds from the broker to purchase securities✓ Correct answer
- BThe customer must pay for all purchases in full by settlement date
- CThe customer may not trade on borrowed funds
- DOnly government bonds may be bought
Explanation
Why A — The customer may borrow funds from the broker to purchase securities
A margin account allows customers to borrow part of the purchase price from the broker. In a cash account, full payment is required. Margin accounts permit securities other than just government bonds.
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