Which of the following describes the process where an investor borrows a percentage of the purchase price of stocks from the brokerage firm?

Question

Quizplus · Accepted Answer

Buying on margin is a trading practice where investors borrow a portion of the money needed to buy a stock from a brokerage firm. The investor puts up a percentage of the stock's value as collateral and the broker lends the rest. This allows investors to purchase more stock than they would be able to with just their own funds, but it also comes with greater risk as any losses will be magnified. Margin calls may be issued if the value of the stock drops below a certain point and the investor must provide additional funds to cover the loss. Futures trading and dealer's account trading are both distinct practices unrelated to buying on margin.

Which of the Following Describes the Process Where an Investor