If the investor buys stock on margin and the price subsequently declines, the percentage loss is magnified.

Name: If the investor buys stock on margin and the price subsequently declines, the percentage loss is magnified.
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Question

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Buying on margin means borrowing money from a broker to purchase stock. If the stock price declines, the investor not only loses on the investment but also has to pay back the borrowed money with interest, magnifying the percentage loss compared to if they had not used margin.

If the Investor Buys Stock on Margin and the Price