SIE Exam Question 101: Answer and Explanation

Question: 101

What is margin in a brokerage account?

• A. The difference between the purchase price and the current value of each security.
• B. The difference between the beginning value and the current value of the entire account.
• C. Borrowed money that is used to purchase securities.
• D. Purchasing power in a cash account.

Correct Answer: C

Explanation:

Margin in a brokerage account is borrowed money that is used to purchase securities. The difference between the purchase price and the current value is called capital gains. The difference between the beginning value and the current value of an account would also be considered capital gains. Purchasing power is all available funds (unsettled, liquid, and borrowed) that can be used to purchase securities.