Series 7 Exam Question 46: Answer and Explanation

Question: 46

An investor would like to open a margin account by purchasing 100 shares of LMN at $14. How much would the investor have to deposit?

• A. $700
• B. $1,400
• C. $2,000
• D. $2,800

Correct Answer: B

Explanation:

B. If the investor was purchasing the stock in an existing margin account, they would only have to deposit Regulation T (50%) of the amount of stock purchased. However, since they are opening the margin account, they must deposit the full $1,400 (100 shares × $14). If the initial purchase was over $2,000, they would have to deposit the greater of 50% of the purchase, or $2,000. For purchases in a new margin account that are less than $2,000, investors must pay for the purchase in full.