Series 7 Exam Question 333: Answer and Explanation

Question: 333

In an initial margin transaction, an investor purchases 100 shares of WXY at $24 per share. What is the margin call?

• A. $1,200
• B. $1,800
• C. $2,000
• D. $2,400

Correct Answer: C

Explanation:

C. Because this investor is opening a margin account (initial transaction), additional rules other than the 50 percent Regulation T requirement are in play. When purchasing securities for the first time, investors must pay in full, pay Regulation T (50 percent) of the transaction, or pay $2,000. If the cost is less than $2,000, the investor pays in full. If the cost is more than $2,000 but Regulation T is less than $2,000 (as it is in this case), the investor pays $2,000. If the cost of the securities is more than $2,000 and Regulation T is greater than $2,000, the investor pays the Regulation T amount.