In an introduction to investments in securities, the practice of purchasing stock using borrowed funds (i.e., on credit through a broker) is called:
A
Buying on margin
B
Short selling
C
Arbitrage
D
Dollar-cost averaging
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1
Understand the key terms related to investing in securities to distinguish between different practices.
Recognize that 'Buying on margin' refers to purchasing stocks using borrowed funds from a broker, which means you pay only a portion of the stock's price and borrow the rest.
Know that 'Short selling' involves selling securities you do not own, hoping to buy them back later at a lower price.
Identify that 'Arbitrage' is the practice of taking advantage of price differences in different markets to make a profit.
Understand that 'Dollar-cost averaging' is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the stock price.