The Difference Between a Cash Account and a Margin Account

question 44

Multiple Choice

The difference between a cash account and a margin account is:

• A)a margin account allows the investor up to five days to pay for the entire purchase.
• B)a cash account gives the investor a 2% discount if they pay within 10 days, or the investor has to pay the entire amount within 30 days (2/10 net 30).
• C)a margin account allows the investor to borrow a percentage of the purchase price from the brokerage firm.
• D)a margin account is less risky to the investor.
• E)a cash account requires the stock be kept registered in street name, and a margin account allows the securities to be delivered to the customer.

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Definitions:

Quantity

The amount or number of a product or service that is available for use or sale.

Technological Advance

Innovations and improvements in technology that increase production efficiency or introduce new goods and services.

Equilibrium Price

The market price where the quantity of goods supplied is equal to the quantity of goods demanded, leading to market stability.

MP3 Players

Portable digital devices designed to play music files in MP3 format, allowing users to listen to music on the go.