Statements about margin trading

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Reference no: EM131932163

1. Which of the following statements about margin trading is correct?

a) When you trade on margin, the equity in your accounts acts as collateral for a brokerage-provided loan.

b) Investors usually remain in margin postiions for extended time periods.

c) There is no difference in the risk an investor takes if he buys stock on the margin or if he pays for the entire purchase in cash.

d) If $1,000 worth of stock is bought on 70% margin, the buyer must invest $300 in cash.

2. Which of the following is UNLIKELY to be a problem for mutual fund managers?

a) Income restricitons as result of the limited number of mutual fund shares they have to sell.

b) The inability to invest in small firms because of the large monetary sums they deal with.

c) Investment planning difficulties resulting from irregular cash flows in and out of the mutual fund.

d) Being forced to sell portfolio assets at low prices if too many shareholders redeem shares at the same time

Reference no: EM131932163

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