What is the purpose of a margin call?
A)To inform you that your margin loan is due and payable
B)To demand funds to increase your margin position
C)To let you know the amount of funds that are now available for you to borrow
D)To advise you that the interest rate on your loan has changed
E)To remind you of the upcoming monthly payment due on your margin loan

Question

Quizplus · Accepted Answer

The purpose of a margin call is to demand funds to increase your margin position. This is done when the value of your collateral (securities held in your margin account) decreases to a certain point, causing your margin ratio to fall below a certain level, and putting your broker at risk of not being able to recover the loan if the securities must be sold to repay the debt. A margin call requires you to deposit additional funds into your account or sell securities to increase your margin position and reduce your risk of default.

What Is the Purpose of a Margin Call