You Have an Arrangement with Your Brokerage Firm That Allows

question 25

Multiple Choice

You have an arrangement with your brokerage firm that allows you to purchase stock on margin with an initial margin requirement of 25 percent and a broker loan rate of 10 percent.What is the maximum amount of stock you can purchase on margin if you have $20,000 to invest?

• A) $150,000
• B) $72,000
• C) $80,000
• D) $22,000
• E) $200,000

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Definitions:

Gratuitous Bailment

A bailment where the bailor lends an item to the bailee without expecting payment, the bailee is thus under a duty to return the item.

Consideration

The value, which could be in the form of money, a promise, or effort, given in exchange for a contractual agreement.

Strict-Liability

A legal concept where a party is liable for damages caused by their actions, regardless of fault or intent, often applied in product liability cases.

Common Law

Also known as case law.