#1
What is margin trading?
Trading with borrowed funds
ExplanationUtilizing borrowed funds for trading purposes
#2
What is the minimum equity requirement for margin trading in most markets?
25%
ExplanationStandard minimum equity requirement for margin trading
#3
What happens if the account equity falls below the maintenance margin?
Margin call is issued
ExplanationIssuance of a margin call to the trader
#4
What is the effect of leverage in margin trading?
Increases potential profits
ExplanationAugmentation of potential profit prospects
#5
What is the difference between initial margin and maintenance margin?
Initial margin is higher than maintenance margin
ExplanationInitial margin surpasses maintenance margin
#6
What is a margin call?
A request to increase the equity in the account
ExplanationRequest for equity increment in the account
#7
What is the purpose of using margin in trading?
To increase potential returns
ExplanationEnhancement of potential return possibilities
#8
What is a short sell in margin trading?
Selling securities that are not owned
ExplanationSale of securities without ownership
#9
What is the impact of a margin account on potential losses?
Increases potential losses
ExplanationElevation of potential loss levels
#10
In margin trading, what is the role of the maintenance margin?
To ensure sufficient equity
ExplanationMaintenance of adequate equity levels
#11
Which of the following is NOT a risk associated with margin trading?
Inflation risk
ExplanationExclusion of inflation risk from associated risks
#12
What is the purpose of the margin account?
To facilitate margin trading
ExplanationFacilitation of margin trading activities
#13
How does a broker determine the initial margin requirement for a trade?
Based on the securities' volatility
ExplanationDetermination based on securities' volatility levels
#14
What is a hypothecation agreement in margin trading?
An agreement to borrow securities
ExplanationAgreement for borrowing securities
#15
Which of the following statements is true about margin trading?
It can result in losses greater than the initial investment
ExplanationPotential for losses exceeding initial investment
#16
How does a broker handle a margin call if the account holder fails to meet it?
Request additional collateral or close positions
ExplanationRequest for more collateral or position closure