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. Markets

    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. Markets

    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. Markets

    Can Dr Pepper's Earnings Inject Confidence? (DPS)

    Investors are eager to see exactly what the doctor ordered.
  4. Investing

    What is a Share Premium Account?

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

    What is an Account Balance?

    An account balance represents the total amount of money in a financial account at any given moment.
  6. 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.
  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. 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 ...
  9. Personal Finance

    Why DR Horton Looks Inviting Ahead of Earnings

    Assuming its ASP continues to climb, DHI stock should reach $32 some time in 2016, delivering 20% gains.
  10. Markets

    Dr. Pepper Stock Pops on Q1 Earnings Beat (DPS)

    Despite the company's solid track record, including beating revenue and earnings estimates in five straight quarters, DPS stock is down 3% year-to-date.
RELATED TERMS
  1. Current Market Value - CMV

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

    In a margin account, money owed by the customer to the broker ...
  3. Account Balance

    1. The amount of money in a financial repository, such as a checking ...
  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. Share Premium Account

    Usually found on the balance sheet, this is the account to which ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center