Staci just used $5,000 of cash plus a $2,500 margin loan to purchase $7,500 worth of stock.This is the only transaction in her brokerage account.According to her account balance sheet,she now has account equity of:

Question

Quizplus · Accepted Answer

Account equity is the difference between the market value of the securities and the amount borrowed. In this case, Staci used $5,000 of her own cash and borrowed $2,500 in a margin loan to purchase $7,500 of stock. When calculating her account equity, we subtract the amount borrowed ($2,500) from the market value of the securities ($7,500) to get $5,000. Therefore, Staci's account equity is $5,000, the same as the amount of her own cash that she invested.

Staci Just Used $5,000 of Cash Plus a $2,500 Margin