Series 7 Exam Practice Test 5: Margin Accounts

1. 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?

2. As an initial transaction in a margin account, an investor purchased 1,000 shares of ABC at $40 with Regulation T at 50%. Two months later, ABC increased to $60. What is the investor's equity?

3. An investor has a margin account with $45,000 in securities, a debit balance of $20,000, and equity of $25,000. With Regulation T at 50%, how much does this investor have in excess equity?

4. Which TWO of the following are TRUE regarding margin accounts?

I. Minimum maintenance on a long account is 25% of the current market value

II. Minimum maintenance on a short account is 25% of the current market value

III. Minimum maintenance on a long account is 30% of the current market value

IV. Minimum maintenance on a short account is 30% of the current market value

5. Declan K. would like to open a margin account by selling short 200 shares of OOOP common stock at $7 per share. What is the margin call?

6. Alyssa has a long margin account with a market value of $30,000, a debit balance of $10,000, an equity of $20,000, and an SMA of $5,000. What is the buying power?

7. Which TWO of the following are TRUE regarding SMA?

I. 50% of dividends or interest received in a margin account go to SMA

II. 100% of dividends or interest received in a margin account go to SMA

III. When an investor withdraws cash from a margin account, the SMA is reduced by 50% of the withdrawal

IV. When an investor withdraws cash from a margin account, the SMA is reduced by 100% of the withdrawal

8. With Regulation T at 50%, the loan value is

9. Mrs. Rice purchased 500 shares of TUV common stock on margin at $30 per share. If TUV is currently trading at $22 per share, how much is the account restricted?

10. A client opens a margin account by selling short 1,000 shares of DIMCO common stock at $30 per share. Six months later with DIMCO trading at $26 per share, how much does this client have in excess equity?