Try Magic Notes and save time.Try it free
Try Magic Notes and save timeCrush your year with the magic of personalized studying.Try it free

S7 - Ch 9 - Cash and Margin Account Basics - Exam - Missed Questions

Get a hint
A customer is short 1,000 shares of ABC @ $4 per share in his margin account. What is the initial margin requirement on this position?
Click the card to flip 👆
1 / 17
1 / 17
Terms in this set (17)
A customer is short 1,000 shares of ABC @ $4 per share in his margin account. What is the initial margin requirement on this position?
$4,000

The initial margin requirement on a short sale depends on the current market value of the stock. For stock selling below $5 per share, the deposit is $2.50 per share or 100% of the market value, whichever is greater. Here the stock is selling at $4. Therefore the required deposit = $4.00 x 1000 shares = $4,000.
A customer buys $30,000 of ABC in a margin account. He pays for these securities in full and there is no debt balance in the account. Reg T is 50%. What is the SMA in the account?
$15,000

Excess Equity (SMA) = Current Equity - (CMV x Reg T%) Reg T = 50%
In a margin account that is restricted, a customer decides to sell stock valued at $8,000, and buy $6,000 worth of another stock on the same day. How much cash would this customer be allowed to withdraw from the account?
$1,000

This customer's account is restricted therefore they would be allowed to withdraw 50% of the net sale proceeds of the transactions, therefore:
$8,000 - $6,000 = $2,000 x 0.50 = $1,000 could be withdrawn.
In an established margin account, a customer purchases options w/ a premium value of $4,000. What is the customer's required deposit on the purchases?
$4,000

Option premiums must always be paid in full when the investor is buying the options. Investors are allowed to purchase options "in" a margin account but cannot buy the options "on margin."
A customer purchases a when-issued stock in a cash account for a total of $60,000. How much must the customer deposit in the cash account?
$15,000

Purchasing stock on a when-issued (WI) basis in either a margin or cash account requires a deposit of cash equal to 25% of the issued cost or $2,000 whichever is greater.