Chapter 15 Practice Questions
1. A customer who opens a margin account may give her broker the right to lend her margined securities to others or to the broker-dealer. This permission is granted or denied in a part of her margin agreement known as the:
A. Hypothecation agreement
B. Loan consent agreement
C. Credit agreement
D. Disclosure agreement
2. Semolina has a margin account with a long market value of $150,000 and equity of $60,000. The original purchase price of her securities, bought over a two-week period, was $180,000. Below what price will her stocks have to fall in value to trigger a margin call?
A. $120,000
B. $100,000
C. $45,000
D. $37,500
3. The term “debit register” in margin trading refers to a record of:
A. The activities in a customer’s special memorandum account
B. The money a customer owes to his broker-dealer in his margin account
C. The current market value of a customer’s borrowed securities
D. Money that can be drawn from a special memorandum account
4. A restricted account is one in which the equity in a margin account is:
A. Less than the initial margin requirement
B. Less than the minimum maintenance requirement
C. Between the initial margin and minimum maintenance requirements
D. Frozen because of a failure to deliver
5. Lenders of stock to short sellers have all of the following privileges except:
A. Earn interest on the collateral in the customer’s margin account
B. Receive a commission for the service they provide
C. Have the right to stock dividends on the shorted stock
D. Have the right to vote shares
6. Latoya opens a margin account and begins trading by buying 100 shares of XYZ at $35 per share. How much money must she deposit to satisfy her initial margin requirement?
A. $3,500
B. $1,750
C. $2,000
D. $5,350
7. Latoya follows up her initial trade by shorting 200 shares of Carlisle at $15 per share.