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

By Investopedia AAA
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.



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