Question
Buying on margin was a method of buying stocks by pooling money with others without any risk with mostly borrowed money without using a broker
Answer
4
(220 Votes)
Miranda
Veteran · Tutor for 11 years
Answer
C. with mostly borrowed money
Explanation
The concept of buying on margin refers to the practice of borrowing money from a broker to purchase stock. This allows the investor to buy more stock than they could with just their own funds. It is important to note that buying on margin does come with risk; if the value of the securities drops significantly, the investor may receive a margin call, requiring them to add more funds to their account or sell off assets to cover the loan. Buying on margin does not involve pooling money with others, and it certainly involves risk. It also requires the use of a broker to provide the loan.