Buying on the margin presents problems under which of the following market circumstances?

Question

Quizplus · Accepted Answer

Buying on the margin involves borrowing money from a broker to purchase stocks, with the expectation of selling them later at a profit to pay off the loan. However, it also exposes the buyer to the risk of significant losses if the stock price falls below the margin threshold, potentially leading to a margin call where the broker requires the buyer to put up more money or sell the stocks to cover the borrowed funds. In a bear market, where stock prices are falling or expected to continue falling, the risk of margin calls is higher and the potential losses are greater, making margin buying less attractive.

Buying on the Margin Presents Problems Under Which of the Following