Question

When purchasing common stock on margin, the cash an investor deposits into a margin account to purchase shares is called the _____, while the _____ is the minimum proportion of equity an investor must keep in his margin account.

A. initial margin; maintenance margin

B. margin call; initial margin

C. maintenance margin; initial margin

D. initial margin; margin call

Answer 1

Answer will be A. Initial margin, Maintanence margin.

A initial margin means the margin that the investors need to deposit in its margin account for the purchase of shares. So while purchasing common stock on margin, the casjh that investor need to pay is the initial margin.

A maintanence margin is the margin that the investors must maintain on the fall of security. It is the minimum amount that investor need to maintain. So the second part maintainance margin will be the answer.