Ace the Ohio SIE Exam 2025 – Unlock Your Financial Future with Confidence!

Question: 1 / 400

What does a margin account allow investors to do?

Buy more shares than they can afford using only their own capital

A margin account allows investors to buy more shares than they can afford using only their own capital. This type of account enables investors to borrow funds from their brokerage firm to purchase additional securities, thereby amplifying their purchasing power. By doing so, they can potentially increase their returns when the value of the investments rises. However, it is important to note that while margin accounts can enhance the potential for profits, they also increase the risk, as losses can be magnified if the value of the investments declines.

While cash transactions and short selling could happen in other types of accounts or contexts, a margin account specifically focuses on leveraging borrowed capital, making it distinct from simply trading in cash transactions or imposing restrictions on short selling or the type of securities that can be invested in.

Get further explanation with Examzify DeepDiveBeta

Trade only in cash transactions

Sell short stocks without any conditions

Invest only in high-risk securities

Next Question

Report this question

Download Ohio Securities Industry Essentials (SIE) Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy