If you buy 100 shares of IBM for $120/share, and the margin on your account is 50%, the broker will float you an interest-free loan of $6,000, until the price of IBM sufficiently rises to the point where you are willing to sell. You pay the broker back its $6,000, and you enjoy the capital gain.

Respuesta :

Answer:

False

Explanation:

This is a True/False question and the answer is false because of the reason highlighted below.

When there's a decrement in the values of the market price of a 100 shares, there's a high probability that one will receive a margin call. The essence of the margin call is none other than asking to make up for the loss in the decreased value of the 100 shares because legally, the brokerage firm have the right to sell one's shares in other to cover your losses.

And also because, buying on margin can never be an "interest free.", this is the reason why the broker will demand the payment of interest on the loan.

Answer:

False

Explanation: