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Leya [2.2K]
3 years ago
6

Which best explains how currency traders can buy large amounts of a currency with little money up front?

Business
2 answers:
Murljashka [212]3 years ago
8 0

Answer:

B. They buy on margin to provide leverage for a large purchase.

Explanation:

Currency traders are able to buy large amounts of currency with little money by buying on margin to provide leverage for a large purchase. Buying on margin points to the initial payments made to a broker for an asset being purchased (in this case, currency). It involves purchasing assets by using leverage and borrowing the balance from a bank or broker. It allows investors to be able to make investments with brokers' money. They act as leverage and therefore are capable of magnifying gains.

alisha [4.7K]3 years ago
7 0

Group of answer choices:

A) <em>They sell shares in their enterprise to provide investment capital. </em><em> </em>

B) <em>They buy on margin to provide leverage for a large purchase.  </em>

C) <em>They purchase only currencies with a very low exchange rate.  </em>

D) <em>They use a bond issue to raise money for their trades.</em>

Answer:

The correct answer is letter "B": They buy on margin to provide leverage for a large purchase.

Explanation:

Margin accounts allow traders to make transactions by <em>leveraging </em>the real amount of money they have in their accounts. Most brokers offer a leverage of 2:1 which implies individuals can trade twice the real amount of money they have but the ratio varies from broker to broker. Some offer 100:1 leverage ratios.  

In such a way<em>, traders can enter in larger positions increasing their profit chances but their losses as well</em>. If the trade does not go as expected, traders may end up owing even more money to what they had in their accounts.

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