Question

A brokerage account in which purchases can only be made if sufficient funds are available is called a(n) _____ account. 1. cash 2. access available 3. clearing 4. call 5. margin

Answer 1

Answer:

1. cash

Explanation:

A cash account is one in which investor must pay the full amount of securities that were purchased. When using this type of account investor is not allowed to borrow from his broker so he must have sufficient funds available before purchasing securities.

Margin account in the other hand can lend money to the investor in case his balance is insufficient. The securities in the investor's portfolio will serve as collateral for the loan collected.

For example if an investor sells stock the money should be available after 3 days. In cash account investor has to wait for the full 3 days before withdrawal is made, while for margin account withdrawal can be made immediately by borrowing finds from the broker.

Answer 2

Answer: Cash account

Explanation: A brokerage account (allows investors to purchase securities) in which purchases can only be made if sufficient funds are available is called a cash account. They are accounts that must be funded with available cash before securities can be bought. Funding can be done through deposits or by the sale of existing position on the same trading day so cash proceeds are available to settle the buy order. Monies in cash accounts can also be lent out, with permission, which presents a potential source of additional gain.