Question: Why is it riskier to buy stocks on margin?

Why is it riskier to buy stocks on margin?

Step by Step Solution

★★★★★

3.36 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The use of margin ie buying securities with initial cash payment and bor... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

124-B-A-I (1628).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Q:

Why is corporate long-term debt riskier than government long-term debt?

Q:

Why do investors generally consider common stock to be riskier than preferred stock?

Q:

Why is the audit of revenue recognition riskier for a new company?

Q:

Why is it riskier to buy stocks on margin?

Q:

You are a portfolio manager for the Tudor Hedge Fund. You have delegated authority to buy and sell stocks. You also have the authority to buy stocks on margin and sell stocks short. You decided to...

Q:

You are a portfolio manager for the Tudor Hedge Fund. You have delegated authority to buy and sell stocks. You also have the authority to buy stocks on margin and sell stocks short. You decided to...

Q:

Brokers' calls Multiple Choice are funds used by individuals who wish to buy stocks on margin. are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if...

Q:

Brokers' calls Multiple Choice are funds used by individuals who wish to buy stocks on margin. are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if...

Q:

What is the difference between each pair of items? a) listed and unlisted securities b) brokers and market makers c) full-service and discount brokerage firms d) primary and secondary market e)...

Q:

1. What is the difference between each pair of items? a) listed and unlisted securities b) brokers and market makers c) full- service and discount brokerage firms d) primary and secondary markets e)...

Q:

A single-phase three-wire 60-Hz circuit serves three loads, as shown in Fig P9.64. Determine L.qa, L.nN, Lc, and the energy use over a 24-hour period in kilowatt-hours.

Q:

You are considering an investment in nickel mines in Russia. Your expectations are that you will take losses eventually, but once infrastructure is built, the project will become more profitable very...

Q:

Compared with money market instruments, capital market instruments have shorter maturities. are not affected by intution are less marketable. have lower default rink.

Q:

The refrigerant R-134a is used as the working fluid in a conventional heat pump cycle. Saturated vapor enters the compressor of this unit at 50 F; its exit temperature from the compressor is measured...

Q:

A continuous foundation having a width of 1.5 m is placed at 1.0 m depth within a loose sand deposit where ' = 32 and = 17.0 kN/m 3 . This sand is underlain by a thick dense sand deposit (' = 40 and...

Q:

1. As a first step, we need to estimate what percentage of MMMs capital comes from debt, preferred stock, and common equity. This information can be found on the firms latest annual balance sheet....

Q:

Refer to the Human Factors study of the performance of a computerized speech recognizer, Exercise 12.26. Recall that the researchers built a complete second-order model for task completion time (y)...

Q:

A compound microscope has objective and eyepiece focal lengths of 6.1 mm and 1.7 cm, respectively. If the lenses are 8.3cm apart, what is the instruments magnification?

Q:

17. What is the rule for assigning foreign keys in a 1:1 association?

Q:

The writer of a covered call may sustain a loss if the price of the stock __________.

Q:

If an option buyers gains increase, that implies the writers losses __________.

Q:

An investor sells a stock short. If the price of the stock increases, the loss on the short position __________.

Q:

e. The after tax cost of debt for the firm is ____% (Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost...

Q:

Consider a three-dimensional Normal random vector: 1 PXY PXZ Y ~ N PXY 1 PY Z Z PXZ PYZ 1 The correlation coefficient between X and Y is pxy . For a multivariate Normal vector, the partial...

Q:

You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of . 5 percent per year, compounded monthly for the first six months, increasing thereafter to 1...