Redirect edit
Why was this redirected to the great depression? Does it lead to depression when people borrow to buy? - Jerryseinfeld 22:04, 18 Dec 2004 (UTC)
Need an explanation edit
I take an example. Someone buys securities for $100 ($30 in cash + $70 from a loan). If the margin is the portion of cash, and the value of the securities drops to this margin ($30), the buyer will default on his loan, won't he? I mean, the margin is not a guarantee for the lender to be paid back here.
- I think the margin call would trigger if the stock fell to $70. Then the broker will force the sale of the stock to cover the loan. The lender gets his or her $70 back, and the buyer loses the entire cash deposit. This is ignoring the effect of interest rates, of course. Terry 01:44, 11 May 2005 (UTC)
- Thanks, sounds clear now. :-)