Margin loans are loans provided to investors where the proceeds are used to purchase securities. Option A is incorrect as there is no legal requirement that margin loans cannot be over 25 percent of the initial stock purchase. Option C describes short selling, not margin loans.

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Margin Loans Are

Question 33

Multiple Choice

Margin loans are

A) illegal if over 25 percent of the initial stock purchase.
B) loans to investors where the proceeds are used to purchase securities.
C) instructions to brokers to borrow shares of stock and sell them today with the guarantee that the investor will replace the borrowed stock by a date in the future.
D) Both a and b are true.

Correct Answer: