Username: PrettyWoman Rating: Asked to: Apinya Kamon Date Created: 16 Jun 2017 |
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Category | 17 |
Tag | Financial |
Question | What is a 'Margin Account'? |
Hello PrettyWoman, A margin account is a brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. Because the customer is investing with a broker's money rather than his own, the customer is using leverage to magnify both gains and losses. For example, an investor with $2,500 in a margin account buys Company A’s stock for $5 per share. With the broker's $2,500 loan, the investor purchases $5,000 of Company A’s stock and receives 1,000 shares. The stock appreciates $10 per share, and the investor makes $10,000. |
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