Which One of the Following Statements About Margin Trading Is

question 116

Multiple Choice

Which one of the following statements about margin trading is correct?

• A) The Federal Reserve sets the minimum margin requirement for margin trading.
• B) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase.
• C) Purchasing stocks on margin is less risky than purchasing stocks by paying cash for the entire purchase.
• D) Margin trading increases the potential profits while lowering the potential losses on a percentage basis.

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Definitions:

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity or volume of production.