"An investor purchases $10,000 worth of marginable stock in his margin account. If the investor wishes to pay for this trade using $5,000 of fully paid marginable stock, how much more in cash, if any, will the investor need to deposit?"

The investor will need to deposit additional $5,000 cash.

Explanation:

a) Data:

Marginable stock in margin account = $10,000

Payment with fully paid marginable stock = $5,000

Balance to be called in the margin account = $5,000 ($10,000 - $5,000)

b) Mrs. Christie opens an account with a brokerage firm by borrowing from the broker in order to purchase stocks or other financial products, and the broker's loan is secured on the collateral of the purchased investments and cash deposited into the account, then a margin account exists.  A margin account attracts a periodic interest rate.  Though, it gives Mrs. Christie the opportunity to purchase more securities than her funds would have initially allowed her, it has all the rewards and risks attached.

c) The stocks or securities which Mrs. Christie has thus purchased are said to be marginable stocks because they are paid for by a loan from the brokerage or other financial institution that lends the money for these trades.

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