When an investor has borrowed part of his investment money from his broker, he has executed a
A)margin transaction.
B)short sale.
C)prime loan.
D)limit order.

Question

Quizplus · Accepted Answer

When an investor borrows money from their broker to invest in securities, it is known as a margin transaction. This allows the investor to increase their purchasing power and potentially increase their returns, but it also exposes them to increased risk if the securities do not perform well. Short selling involves selling securities that the investor does not own, with the hope of buying them back at a lower price and profiting from the difference. A prime loan is a type of loan provided to high-quality credit borrowers. A limit order is an instruction to buy or sell securities at a specific price or better. A margin transaction is when an investor borrows money from their broker to supplement their own capital when investing, allowing them to potentially make larger investments and potentially higher returns. This type of transaction involves using the investor's investment portfolio as collateral for the loan from the broker.

When an Investor Has Borrowed Part of His Investment Money