GARP Financial Risk and Regulation (FRR) Series 2016-FRR Question # 58 Topic 6 Discussion
2016-FRR Exam Topic 6 Question 58 Discussion:
Question #: 58
Topic #: 6
In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may borrow up to ___ of the value of the securities from their brokers.
Regulation T of the Federal Reserve Bank governs the amount of credit that brokers and dealers can extend to investors for the purchase of securities.
Borrowing limit:
Regulation T allows investors to borrow up to 50% of the value of the securities from their brokers.
Explanation:
This regulation is in place to limit the amount of leverage investors can use when buying securities, aiming to reduce the risk of significant market volatility and potential defaults.
[References:, From the search results and standard financial regulations knowledge, the limit specified in Regulation T is consistent with 50% of the value of the securities., opic 3, Volume C]
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit