Which of the following is false regarding margin?
A) Margin accounts typically allow for unlimited margin purchases.
B) The spread you pay above the call money rate typically declines as you borrow more.
C) You must sign a hypothecation agreement to purchase stocks on margin.
D) You own 100 shares of Stock X purchased with cash and purchase 100 shares of Stock Y on margin. If you do not cover a margin call, your broker can sell shares of Stock X until you meet the maintenance margin.
E) The initial margin requirement on government bonds is lower than the initial margin requirement on stocks.

Question

Quizplus · Accepted Answer

Margin accounts do not typically allow for unlimited margin purchases. There are regulations that limit the amount of borrowing and require investors to maintain a certain level of equity in their account.

Which of the Following Is False Regarding Margin