A:

ABC stock – 200 shares.
CMV $40/share PDQ stock – 100 shares.
CMV $30/share LIB stock – 100 shares.
CMV $50/ share
Debit balance -- $6,400



If this customer used any SMA in the account to its maximum by purchasing stock, the DR balance in the account would be:



A) $12,800
B) $9,600
C) $8,000
D) $3,200




The correct answer is B.



Any time an investor uses SMA, he/she is borrowing money from the broker-dealer and increasing the DR balance. SMA has a purchasing power equaling the SMA x 2 ($1,600 x 2 = $3,200). The broker-dealer will loan the client an additional $3,200 to purchase stock. Add this to the existing DR balance of $6,400 + $3,200 = $9,600.



RELATED FAQS
  1. Use the following information about a customer’s margin account to answer the question ...

    The correct answer is b. Any time an investor uses SMA, he/she is borrowing money from the broker-dealer and increasing the ... Read Answer >>
  2. Just prior to the close of the markets on the final trading day before expiration ...

    The correct answer is d. The investor opened the spread strategy with a net debit of $600. When he/she closes the 40 call ... Read Answer >>
  3. A customer has the following in his long margin account. Market value: $18,000, ...

    A. NoneB. $1,000C. $1,500D. $2,000 Correct answer: DExplanation: The account is in restriction since the equity is less than ... Read Answer >>
  4. A registered representative has been following PDQ stock in the market over the ...

    The correct answer is c. Current yield compares the current price of acquiring the stock to the income from the stock, the ... Read Answer >>
  5. A brokerage customer has $10,000 in securities and a credit balance of $4,000 ... ...

    The correct answer is d The market value of the person's equity is equal to the market value of the securities plus the credit ... Read Answer >>
  6. Why is the 200 Simple Moving Average (SMA) so common for traders and analysts?

    Learn about the 200 simple moving average (SMA), how it is utilized by traders and analysts, and why it is considered to ... Read Answer >>
Related Articles
  1. Investing

    Dr Pepper Stock Trades Ex-Dividend Friday (DPS)

    Dr Pepper will send its dividend payment on July 7 to shareholders of record as of June 14.
  2. Investing

    DR Horton Earnings Coming Up, What to Expect? (DHI)

    There's strong pent up demand for DR Horton-built homes, which will likely translate to a higher stock price in the quarters ahead.
  3. Personal Finance

    What is an Account Balance?

    An account balance represents the total amount of money in a financial account at any given moment.
  4. Investing

    What is a Share Premium Account?

    The share premium account is an equity account found on a company’s balance sheet.
  5. Investing

    What Does Debit Mean?

    Debit is an accounting term used to refer to the left side of an accounting journal entry. Each debit must be offset by an equal credit entry.
  6. Investing

    What's a Trial Balance?

    A trial balance is a worksheet listing the debit or credit balances of all the ledger accounts for an entity. Under accounting theory, the total of all the debits must equal the total of all ...
  7. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  8. Financial Advisor

    The Pros & Cons of Partnering with a Broker/Dealer

    Financial advisors must determine a business model that meets their needs and meets the expectations of their clients.
  9. Investing

    Dr. Reddy’s Labs Launches New Drug (RDY)

    To challenge Evista, Dr. Reddy’s Laboratories released raloxifene hydrochloride tablets to the U.S. market last week.
  10. Investing

    Getting Acquainted With Treasury Stock

    When publicly traded businesses decided to buy back some of their outstanding shares, it becomes treasury stock. Treasury stock confers no voting rights or dividends, but helps boost shareholder ...
RELATED TERMS
  1. Current Market Value - CMV

    The resale valuation attached to a security held long in an investor's ...
  2. Account Balance

    1. The amount of money in a financial repository, such as a checking ...
  3. Debit Balance

    In a margin account, money owed by the customer to the broker ...
  4. Adjusted Debit Balance

    The amount in a margin account that is owed to the broker, minus ...
  5. Average Balance

    The balance on a loan or depositary account. A simple average ...
  6. Debit

    An accounting entry that results in either an increase in assets ...
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center