FINRA Series 7Investment Information and Suitable RecommendationsEasy
A client wants to purchase 200 shares of ABC stock at $70 per share in a margin account. What is the minimum initial margin requirement under Regulation T?
- A$14,000
- B$10,000
- C$7,000
- D$3,500
Show answer & explanationAnswer & explanation
Correct answer: C. $7,000
Regulation T requires an initial margin of 50% of the purchase price for long positions, or $2,000, whichever is greater. In this case, 50% of $14,000 is $7,000, which is greater than $2,000.
Why the other options are wrong
- A. This is the full purchase price, not the margin requirement.
- B. This is the minimum for purchases under $4,000, but not applicable here.
- D. This is 25% of the purchase price, which is not the initial margin requirement.
Regulation T Initial Margin (Long)
For long stock positions, Regulation T requires an initial deposit of 50% of the purchase price or $2,000, whichever amount is greater.
- Applies to margin accounts.
- Minimum of 50% of market value.
- Absolute minimum is $2,000 (for purchases under $4,000).
Memory trick: Reg T: Half the Price, At least Two Grand.