Why was stock bought on margin considered a risky investment? Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan. Stocks purchased on margin were often for companies that had little or no value. Investors paid high interest rates to buy these stocks; they needed a substantial return to make money. If the value of the stock declined, brokerages were responsible for the loss.

Students were enquired to answer a question at academics and to say what is most important for them to succeed. The one which response stood out from the rest was practice. Persons who commonly are successful do not become successful by being born. They work hard and determination their lives to succeeding. If you tend to accomplish your goals, keep this in mind! These are some question and answer examples that you will be able to benefit from to boost your knowledge and gain insight that will assist you to sustain your school studies.

Question:

Why was stock bought on margin considered a risky investment? Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan. Stocks purchased on margin were often for companies that had little or no value. Investors paid high interest rates to buy these stocks; they needed a substantial return to make money. If the value of the stock declined, brokerages were responsible for the loss.

Answer:

Stocks bought on margin are considered risky investments because these stocks are purchased with a loan and therefore, require a higher return in order for the holder to make money and repay the loan that was taken. Also if the stocks were to lose money then the stockholder would lose a great deal of money in attempting to repay the loan. 

They can hopefully guide the student handle the question by working with the questions and answer examples. Then may possibly have some sharing in a group discussion and also study with the classmate relevant to the topic, so another student also has some enlightenment and still keeps up the school learning.

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