When You Borrow Stock from a Broker and Sell It

question 7

Multiple Choice

When you borrow stock from a broker and sell it now with plans to buy it back after it drops in price, you are engaging in a

• A)margin call
• B)European option
• C)American option
• D)short sale

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Definitions:

Adjusting Entries

Documentation made at the culmination of an accounting period, aiming to allocate revenues and expenses to the correct timeframe of their occurrence.

Fiscal Year

A one-year period used for financial reporting and budgeting, which may not align with the calendar year.

Net Income

Represents the total profit of a company after all expenses and taxes have been subtracted from total revenue.

Insurance Policy

A contract between an insurer and a policyholder stipulating the terms under which the insurer agrees to compensate the insured for specific losses.