If the Federal Reserve has set the margin requirement at 50 percent, an investor can buy three times as many shares of stock by choosing to buy on margin.

Question

Quizplus · Accepted Answer

If the margin requirement is set at 50 percent, it means that an investor can only borrow up to 50 percent of the total value of the securities being purchased. This means that the investor must also contribute 50 percent of the total value in cash or other eligible collateral. Therefore, if an investor chooses to buy on margin, they can only purchase up to two times the amount they could purchase with their own funds, not three times.

If the Federal Reserve Has Set the Margin Requirement at 50