Buying on margin is a risky way to purchase stocks

Asked by admin @ 26/11/2021 in History viewed by 239 People

Why was stock bought on margin considered a risky investment? A. Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan. B. Stocks purchased on margin were often for companies that had little or no value. C. Investors paid high interest rates to buy these stocks; they needed a substantial return to make money. D. If the value of the stock declined, brokerages were responsible for the loss.

Answered by admin @ 26/11/2021

Answer:

Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan.

Choice A is correct

Explanation:

Stocks bought on margin were considered a risky investment because investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan. An investor is able to purchase stock worth 20000 with just 2000 using margin.

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