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Brokers who sell stock on margin will protect themselves by Blank______.Multiple select question.requiring additional cash contributions from the investorholding the stock as collateralselling the stock to satisfy the loancharging high rates of interest

Question

Brokers who sell stock on margin will protect themselves by Blank______.Multiple select question.requiring additional cash contributions from the investorholding the stock as collateralselling the stock to satisfy the loancharging high rates of interest

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Solution

Brokers who sell stock on margin protect themselves by:

  1. Requiring additional cash contributions from the investor: This is to ensure that the investor has enough funds to cover the loan in case the stock price falls.

  2. Holding the stock as collateral: This means that if the investor cannot repay the loan, the broker can sell the stock to recover the funds.

  3. Selling the stock to satisfy the loan: If the stock price falls significantly, the broker can sell the stock to recover the loan amount.

  4. Charging high rates of interest: This is another way for brokers to protect themselves. The higher the interest rate, the more money the broker makes from the loan, which can help cover potential losses.

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