Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following best explains what happens when currency traders buy on margin?

They exchange one currency for another at the spot rate without using any borrowed funds.

They purchase currency at the current market price and immediately sell it at a higher price.

They invest only in government securities to minimize risk.

They borrow funds from a broker to purchase more currency than they could with their own capital.

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Verified step by step guidance

Understand the concept of buying on margin: Buying on margin involves borrowing funds from a broker to purchase assets, such as currency, allowing traders to leverage their capital and potentially increase their returns.

Analyze the options provided in the problem: Carefully read each option and determine whether it aligns with the concept of buying on margin.

Option 1: 'They exchange one currency for another at the spot rate without using any borrowed funds.' This does not involve borrowing funds, so it does not describe buying on margin.

Option 2: 'They purchase currency at the current market price and immediately sell it at a higher price.' While this describes a trading strategy, it does not specifically involve borrowing funds, so it is not related to buying on margin.

Option 4: 'They borrow funds from a broker to purchase more currency than they could with their own capital.' This directly aligns with the concept of buying on margin, as it involves leveraging borrowed funds to increase purchasing power.