Margin Buying/Trading
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Discuss margin buying of common stocks. Include in your discussion the advantages and disadvantages, the types of margin requirements, how these requirements are met, and who determines these requirements.
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Solution Summary
This solution discusses the margin buying/trading of common stock; the solution provides a detailed overview of its advantages and disadvantages, the types of margin requirements, how these requirements are met, and who determines these requirements.
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The US Securities and Exchange Commission Website defines Margin as, "borrowing money from your broker to buy a stock and using your investment as collateral". An investment of at least $2,000 is required to open a margin account; this deposit is known as the minimum margin. Margin is simply equity as a percent of the value of your account. Subsequent to opening the account, stock prices change and thus the margin of your account changes. According to Regulation T of the Federal Reserve Board, you may borrow up to 50 percent of the purchase price of ...
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