Call Money Rate

What is the 'Call Money Rate'

The call money rate is the interest rate on a type of short-term loan that banks give to brokers who in turn lend the money to investors to fund margin accounts. For both brokers and investors, this type of loan does not have a set repayment schedule and must be repaid on demand.

BREAKING DOWN 'Call Money Rate'

Trading on margin is a risky strategy in which investors make trades with borrowed money. The advantage of margin trading is that investment gains are magnified; the disadvantage is that losses are also magnified. When investors trading on margin experience a decline in equity past a certain level relative to the amount they have borrowed, the brokerage will issue a margin call that requires them to deposit more cash in their account or to sell enough securities to make up the shortfall.

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RELATED FAQS
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  2. What is the interest rate offered on a typical margin account?

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  3. How does margin trading in the forex market work?

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  4. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  5. Do you have to sell your stocks when you get a margin call?

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