If a stock is bought on margin,

Question

Quizplus · Accepted Answer

When a stock is bought on margin, part of the cost of the investment is borrowed from the broker. This means that the investor is using leverage to increase their potential returns, but also increases their potential losses. Commission rates and interest rates on the borrowed funds are set by the broker, not the SEC. The cost of the investment is not reduced, as the investor will eventually have to repay the borrowed funds with interest.

If a Stock Is Bought on Margin