CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

Buying securities on margin means that an investor ______
A. borrows the money for the purchase directly from a bank.
B. puts up cash for part of the purchase price and borrows the balance directly from a bank.
C. puts up cash for part of the purchase price and borrows the balance from the selling brokerage firm.
Explanation: Buying on margin means putting up some of the cost of the securities (the margin) and borrowing the rest from the broker. Brokers in turn borrow from their banks at the broker call loan rate (regulated by the Fed). The broker charges the customer a rate higher than that (frequently tied to the prime rate).

User Contributed Comments 0

You need to log in first to add your comment.