Margin Accounts: The Nature of the Debt An investor must pay interest on a margin loan, until the debt is repaid from the eventual sale of the securities e The base rate for these loans is called the broker's call money rate The smaller the loan, the higher the interest rate Strong c6- market Mechanics
6 - 11 Strong C6 – Market Mechanics Margin Accounts: The Nature of the Debt ◆ An investor must pay interest on a margin loan, until the debt is repaid from the eventual sale of the securities. ◆ The base rate for these loans is called the broker’s call money rate. ◆ The smaller the loan, the higher the interest rate
Margin Accounts: Fed Regulation T the Federal Reserve Board i gulation T of o Margin trading is governed by re The initial margin requirement is the percentage an investor must pay toward new purchases. L +The maintenance margin requirement determines how badly a position can deteriorate before the investor must deposit more money into the account portfolio Strong c6- market Mechanics 6-12
6 - 12 Strong C6 – Market Mechanics Margin Accounts: Fed Regulation T ◆ Margin trading is governed by Regulation T of the Federal Reserve Board. ◆ The initial margin requirement is the percentage an investor must pay toward new purchases. ◆The maintenance margin requirement determines how badly a position can deteriorate before the investor must deposit more money into the account portfolio