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. What are the main advantages and disadvantages of using a Simple Moving Average (SMA)?

    Examine some of the potential advantages and disadvantages involved with the use of a simple moving average or an exponential ... Read Answer >>
  2. What is the difference between a simple moving average and an exponential moving ...

    The only difference between these two types of moving average is the sensitivity each one shows to changes in the data used ... Read Answer >>
  3. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Answer >>
  4. What's the difference between a cash account and a margin account?

    Compare and contrast margin and cash accounts. Margin accounts offer short-term loans, leverage on existing portfolios, and ... Read Answer >>
  5. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
Related Articles
  1. Investing

    PTC Therapeutics $20M Milestone on Horizon (PTCT)

    PTC Therapeutics initiated a Phase 2 study for its RG7916 drug to treat Type 2 and Type 3 Spinal Muscular Atrophy (SMA) in children and adults.
  2. Investing

    Cytokinetics SMA Drug Did Well in Early Study

    Cytokinetics' spinal muscular atrophy drug, CK-2127107, improved muscle function in a pre-clinical study.
  3. Investing

    AveXis Reports Positive Data for SMA Gene Therapy

    AveXis' spinal muscular atrophy drug, AVXS-101, reported encouraging results from a Phase 1 trial.
  4. Insights

    Biogen Gets Competition for SMA Therapy (BIIB)

    The newly listed company can offer strong competition to Biogen and Ionis for SMA therapy.
  5. Investing

    The P/E Ratio: A Good Market-Timing Indicator

    Check out the returns this newer technical analysis tool would've yielded over the period from 1920 to 2003.
  6. Trading

    Solving Mixed Options Problems On The Series 7

    Learn to ace the questions that involve both options contracts and stock positions.
  7. 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.
  8. Investing

    What is Restricted Cash?

    Restricted cash is cash that’s not available for a company to use immediately. It’s earmarked for some specific purpose.
  9. Personal Finance

    What is an Account Balance?

    An account balance represents the total amount of money in a financial account at any given moment.
  10. Small Business

    How Restricted Stocks and RSUs Are Taxed

    Many firms pay a portion of their employees’ compensation in the form of restricted stock or restricted stock units.
RELATED TERMS
  1. Special Memorandum Account - SMA

    A special account where excess margin generated from a client's ...
  2. Free Credit Balance

    The cash held by a broker in a customer's margin account that ...
  3. Adjusted Debit Balance

    The amount in a margin account that is owed to the broker, minus ...
  4. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  5. STARC Bands

    A type of technical indicator that is created by plotting two ...
  6. Restricted Market

    A market which does not allow for a free-floating exchange rate, ...
Hot Definitions
  1. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  2. AAA

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

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  4. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  5. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
  6. Custodian

    A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. ...
Trading Center