Which One of the Following Best Describes the Term "Initial

question 63

Multiple Choice

Which one of the following best describes the term "initial margin"?

• A)Amount of money that must be deposited to open a margin account with a broker
• B)Amount of cash that must be paid to purchase a security on margin
• C)Amount of cash that must be paid when a broker issues a margin call
• D)Amount of money borrowed when a security is purchased
• E)Total loan amount offered to a customer by a brokerage firm to cover future purchases

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Definitions:

Cost of Equity

The theoretical compensation a company provides to its shareholders for the risk they assume by investing their funds.

Beta

A measure of the volatility of a stock or portfolio compared to the volatility of the overall market.

Dividend Growth Model

A method of valuing a company's stock price by using predicted dividends and discounting them back to present value.

Cost of Equity

The return that investors expect for investing in a company's equity, often calculated using models like the Capital Asset Pricing Model (CAPM).