A customer has the following in his long margin account. Market value: $18,000, debit balance: $10,000 and SMA: $2,000. How much of the SMA may be used to purchase additional securities?

By Peter Cherewyk AAA
A:

A. None



B. $1,000



C. $1,500



D. $2,000




Correct answer: D

Explanation: The account is in restriction since the equity is less than 50% of the market value. [MV – DR = EQ --$18,000 - $10,000 = $8,000]. 50% of $18,000 = $9,000. The account is in restriction by $1,000. The SMA may be used so long as it does not push the EQ below the 25% maintenance level.



RELATED FAQS

  1. How do I implement a forex strategy when spotting a Triple Bottom Pattern?

    Learn about the triple bottom pattern and how it is used to create effective trade strategy in the forex market, including ...
  2. What role do core competencies play in a balanced scorecard?

    See how some businesses can combine the concepts of core competency and a balanced scorecard in an attempt to build sustainable ...
  3. How are Upside Gap Two Crows patterns interpreted by analysts and traders?

    Learn about the upside gap two crows chart pattern and how analysts and traders interpret this pattern as an indicator of ...
  4. How do I build a profitable trading strategy when spotting an Upside Gap Two Crows ...

    Learn about the upside gap two crows pattern and how this reversal signal is used to create profitable trade strategy, including ...
RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  3. Ceded Reinsurance Leverage

    The ratio of ceded insurance balances to policyholders’ surplus. ...
  4. Mass Index

    A form of technical analysis that looks at the range between ...
  5. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
  6. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...

You May Also Like

Related Articles
  1. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

  2. Trading Strategies

    Trading On The Psychology Of Round Numbers

  3. Trading Strategies

    How To Make The Most of Fibonacci Grids

  4. Trading Strategies

    You'll Lose Profits Without This Trading ...

  5. Investing

    Ready To Invest In Financial Leverage ...

Trading Center