Customer accounts: Long Margin Accounts

A customer has a restricted margin account, with $5,000 of SMA. The customer wishes to buy $10,000 of a marginable listed stock. The customer must deposit: A. $0 B. $2,500 C. $5,000 D. $7,500

A. $0

A customer has an existing margin account with the following positions: Long: 1,000 XYZ Cmn Mkt Value: $20,000 Long: 10 PDQ Jan 50 Calls Mkt Value: $5,000 Debit Bal: $15,000 SMA: $1,000 How much cash can the customer withdraw (borrow) from the account? A. 0 B. $500 C. $1,000 D. $2,000

A. 0

A long margin account is restricted under Regulation T if the margin percentage falls below: A. 50% B. 40% C. 30% D. 25%

A. 50%

All of the following are affected when securities are sold in a restricted margin account EXCEPT: A. Equity B. Long Market Value C. SMA D. Debit Balance

A. Equity

"Restriction" in a margin account: I is defined by the Federal Reserve Board II is defined by the Financial Industry Regulatory Authority III occurs if the account falls below initial Regulation T margin IV occurs if the account falls below minimum maintenance margin

A. I and III

Which of the following statements are TRUE regarding maintenance margin calls? I Maintenance margin calls must be met promptly II Maintenance margin calls must be met within 5 days of receiving the call III If the maintenance call is not met, enough securities will be sold out of the account to satisfy the maintenance call IV If the maintenance call is not met, the entire account will be liquidated A. I and III B. I and IV C. II and III D. II and IV

A. I and III

Equity in a Long Margin Account is: StatusA A. Long Market Value Minus Debit Balance StatusB B. Long Market Value Plus Debit Balance StatusC C. Long Market Value Minus Credit Balance StatusD D. Long Market Value Plus Credit Balance

A. Long Market Value Minus Debit Balance

If a withdrawal will not take a margin account below minimum maintenance margin, any cash dividends received: A. can be withdrawn B. cannot be withdrawn C. can be used solely to reduce the debit balance D. can be used solely to pay interest on the debit balance

A. can be withdrawn

A customer's account shows the following: LONG 100 ABC Common 100 DEF Common MARKET VALUE $15,000 $20,000 DEBIT $20,000 SMA $4,000 The customer sells the ABC position. The SMA account will be: A. credited by $7,500 B. debited by $7,500 C. credited by $15,000 D. debited by $15,000

A. credited by $7,500

The greater the leverage in a long margin account, the: A. greater the percentage increase in equity as market prices rise B. greater the percentage increase in equity as market prices fall C. lesser the percentage increase in equity as market prices rise D. lesser the percentage increase in equity as market prices fall

A. greater the percentage increase in equity as market prices rise

A customer opens a long margin account with 1 position, consisting of 100 shares of ABC stock valued at $20 per share. There is no debit balance in the account. If the customer buys 100 shares of XYZ at $50 per share, the margin call will be: StatusA A. $1,000 Correct Answer B. $1,500 StatusC C. $2,000 Incorrect Answer D. $3,000

B. $1,500 Prior to making the new purchase, the margin account held 100 shares of ABC at $20, fully paid, for equity of $2,000 in the account. There is $1,000 of SMA from this position that cannot be used currently, since minimum margin to open an account is $2,000 of equity or the account being "fully paid," whichever is less. Now the customer wishes to buy another $5,000 of stock, which would generate a Regulation T call of $2,500. Since there is $1,000 of SMA in the account, the customer need only deposit $1,500. After all this, the account will show: Long Market Value - Debit = Equity $2,000 $2,000 Original Position $5,000 $3,500 $1,500 New Position $7,000 $3,500 $3,500

A customer opens a margin account by purchasing: 100 shares ABC Common @ $50 200 shares PDQ Common @ $80 100 shares XYZ Common @ $20 The customer deposits the required margin amount. Subsequently, ABC stock increases to $60; PDQ to $100; and XYZ to $40. The new equity in the account is? A. $11,500 B. $18,500 C. $20,000 D. $30,000

B. $18,500

A customer has an existing margin account that shows: $16,000 LMV $14,000 Debit The customer will receive a call for minimum maintenance margin of: A. $1,000 B. $2,000 C. $3,000 D. $4,000

B. $2,000 The account has $16,000 of securities x 25% minimum maintenance margin = $4,000 minimum equity requirement. Since the account has $2,000 of equity, an additional $2,000 must be deposited to bring the account to minimum maintenance.

A customer margin account shows the following: 100 shares ABC Common @ $50 200 shares PDQ Common @ $80 100 shares XYZ common @ $20 Debit Balance: $14,000 The account is restricted by: A. $2,200 B. $2,500 C. $3,000 D. $3,500

B. $2,500

A customer margin account shows: 100 shares of ABC @ $50 300 shares of DEF @ $80 200 shares of PDQ @ $30 Debit = $6,000 SMA = $11,500 Reg. T = 50% What is the equity in the account? StatusA A. $35,000 StatusB B. $29,000 StatusC C. $23,500 StatusD D. $17,500

B. $29,000

As the initial transaction in a new margin account, a customer buys: 100 shares of ABC @ $30 300 shares of DEF @ $40 200 shares of PDQ @ $50 The customer deposits the required margin. Subsequently, ABC stock rises to $40; DEF rises to $50; and PDQ rises to $60. The SMA in the account is: A. $0 B. $3,000 C. $6,000 D. $18,500

B. $3,000

A margin account is opened with a $7,500 debit balance. On the account statement for that month is shown $75 of interest charged, and $150 of dividends received. The debit balance at month-end will be: A. $7,275 B. $7,425 C. $7,575 D. $7,725

B. $7,425 Interest charged increases the customer's debit balance. Cash dividends received reduce the customer's debit balance. Thus, starting with a $7,500 debit, the interest charged of $75 increases the debit to $7,575; and the dividend of $150 received reduces the debit down to $7,425.

A customer's margin account show the following: 100 shares of ABC @ $45 200 shares of PDQ @ $64 200 shares of XYZ @ $72 Debit Balance: $12,000 SMA: $3,850 What is the minimum maintenance margin requirement? A. $7,700 B. $7,925 C. $8,245 D. $9,510

B. $7,925 Minimum maintenance margin in a long account is 25% of market value. 25% of $31,700 = $7,925 minimum maintenance margin. Since the account has $19,700 of equity, it is well above the minimum.

A customer has a long margin account with no SMA. If the market value of the securities rises, SMA will increase by: A. 25% of the increase in market value B. 50% of the increase in market value C. 100% of the increase in market value D. 150% of the increase in market value

B. 50% of the increase in market value

Which of the following will satisfy a Reg T margin call for $1,000? I Deposit of $1,000 cash II Deposit of $2,000 of fully paid marginable securities III Deposit of $2,000 of fully paid option contracts A. I only B. I and II C. II and III D. I, II, III

B. I and II

When comparing a margin account to a cash account, which of the following statements are TRUE? I Margin accounts have greater leverage than cash accounts II Margin accounts have the same leverage as cash accounts III Margin accounts have greater price volatility than cash accounts IV Margin accounts have the same price volatility as cash accounts

B. I and IV

Which of the following statements are TRUE regarding the sale of a long position in a restricted long margin account? I 50% of the proceeds of the sale are credited to SMA II 100% of the proceeds of the sale are credited to SMA III There is a 0% retention requirement of the sale for a restricted account IV There is a 50% retention requirement of the sale for a restricted account A. I and III B. I and IV C. II and III D. II and IV

B. I and IV

Which statements are TRUE about buying stock in a margin account? I 50% of the purchase amount must be deposited in cash II 100% of the purchase amount must be deposited in cash III 50% of the purchase amount must be deposited in fully paid securities IV 100% of the purchase amount must be deposited in fully paid securities

B. I or IV

A customer opens a long margin account with 1 position, consisting of 100 shares of ABC stock valued at $10 per share. There is no debit balance in the account. If the customer buys 100 shares of XYZ at $50 per share, the margin call will be: A. $1,000 B. $1,500 C. $2,000 D. $2,500

C. $2,000

Long Margin Account Market Value: $80,000 Debit Balance: $30,000 If the customer buys $80,000 of listed stocks and sells $20,000 of listed stocks on the same day, the customer must deposit: A. 0 B. $10,000 C. $20,000 D. $30,000

C. $20,000

A customer buys 100 shares of PDQ at $28 as the initial transaction in a new margin account. Subsequently, PDQ rises to $38 per share in the market. What is account's equity after the change in market value? A. $1,900 B. $2,000 C. $3,000 D. $4,000

C. $3,000

A customer buys 300 shares of ABC at $40, depositing the Regulation T requirement on the 3rd business day after trade date. He holds the position for two months, during which $100 of interest is charged on the debit balance. What is the adjusted debit balance at the end of the two month period? A. $5,900 B. $6,000 C. $6,100 D. $6,200

C. $6,100

A customer receives an initial Regulation T call for $15,000 and wishes to pay by depositing fully paid marginable stock, currently trading at $30 per share. The customer must deposit: A. 300 shares B. 500 shares C. 1,000 shares D. 1,500 shares

C. 1,000 shares

A customer has a margin account with a long market value of $10,000, a $4,000 debit, and $1,000 of SMA. If the market value of the securities increases by 10%, SMA will increase by: A. 5% B. 10% C. 50% D. 100%

C. 50%

A customer's margin account is restricted by $1,000. To eliminate the restriction, which of the following actions are appropriate? I Deposit $1,000 cash to the account II Deposit $2,000 of fully paid marginable stock to the account III Sell $2,000 of marginable stock in the account IV Transfer $1,000 from SMA A. I only B. II and III only C. I, II, III D. I, II, III, IV

C. I, II, III

As the initial transaction in a new margin account, a customer buys 1,000 shares of XYZ stock at $40 and deposits the required margin. The market value increases to $50. Which statements are TRUE? I Equity increases by $5,000 II Equity increases by $10,000 III SMA increases by $5,000 IV SMA increases by $10,000 A. I and III B. I and IV C. II and III D. II and IV

C. II and III

A customer has an existing margin account that is restricted by $400. The customer receives a $1,000 dividend on securities held in the account. The customer can immediately withdraw: A. 0 B. $100 C. $600 D. $1,000

D. $1,000 Cash dividends received from stock held in a margin account (whether the account is restricted or not) are applied against the debit and are 100% credited to SMA for 30 days. During this period, the customer can take out the dividend in full, restoring the debit to its original higher amount. After 30 days, if the customer does not take the dividend, the credit resulting from the dividend is automatically cleared from SMA and permanently reduces the debit.

In a new margin account, a customer buys 1,000 shares of ABC stock at $30 per share. The stock rises to $60 during the next week and subsequently declines to $45. If there are no other transactions in the account, the current SMA balance would be: A. $2,500 B. $7,500 C. $10,000 D. $15,000

D. $15,000

A customer buys 200 shares of ABC common stock at $50 and buys 20 XYZ October 50 Calls @ $5 on the same day in a margin account. The customer wishes to meet the margin call by depositing fully paid PDQ stock, currently valued at $50 per share. How many shares of PDQ must be deposited? A. 200 B. 300 C. 400 D. 600

D. 600 To meet a margin call by depositing fully paid marginable stock, securities equal to twice the call amount must be deposited (since 50% can be loaned against equity securities, 2x the securities are needed). The margin call to purchase $10,000 of ABC stock is $5,000 (50% margin). The margin call to buy 20 Call contracts at $5 ($10,000 of call contracts) is $10,000 (100% margin-fully paid). Thus, the total margin call is $15,000. To meet this call, PDQ stock with a market value of $30,000 must be deposited. Since the stock is trading at $50 per share, $30,000 / $50 per share = 600 shares of PDQ must be deposited

A customer holds shares of ABC stock in a long margin account. ABC declares and pays a stock dividend. After the distribution is received in the account, the: I equity in the account will be decreased II equity in the account remains the same III market value of ABC stock in the account will be decreased IV market value of ABC stock in the account will be the same A. I and III B. I and IV C. II and III D. II and IV

D. II and IV

Which of the following does NOT affect SMA in a long margin account? A. purchase of securities B. sale of securities C. increase in market value D. decrease in market value

D. decrease in market value

A customer with a long margin account receives a call for minimum maintenance margin on Tuesday morning. The call notice states that the funds are to be deposited by Thursday. If the funds do not arrive, the firm has the right to sell out: A. the entire account on Thursday at the market close B. the entire account on Friday at the market opening C. enough securities from the account to meet the call on Thursday at the market close D. enough securities from the account to meet the call on Friday at the market opening

D. enough securities from the account to meet the call on Friday at the market opening

Which of the following are provisions of Regulation T? I Payment is required promptly but no later than 5 business days after trade date II Minimum maintenance margin requirement is $2,000 per account III Retention requirement is 50% in restricted accounts IV Initial margin requirement is 50% on stocks

I, III, IV

A customer margin account shows: 200 shares of ABC @ $40 200 shares of DEF @ $25 400 shares of PDQ @ $15 Debit = $9,000 SMA = $500 Reg. T = 50% How much of other marginable common stocks can be purchased without making a deposit? A. $500 B. $1,000 C. $1,500 D. $2,000

B. $1,000

For every $1 that the market value of a long account rises above initial Regulation T margin, SMA will be credited with: A. $0 B. $.25 C. $.50 D. $1.00

C. $.50

A customer has a long margin account with $12,000 of stock and a $6,000 debit balance. Below which market value will the account receive a maintenance call? A. $10,000 B. $9,000 C. $8,000 D. $6,000

C. $8,000