Stocks Intermediate: Types of Stock Accounts

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1.
To churn an account is to _______.
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Execute trades for the sole purpose of generating commissions. To churn an account is to execute trades for the sole purpose of generating commissions.
2.
The cash account is the most common type of securities account.
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True. The most common type of investor securities account is the cash account.
3.
A "special miscellaneous account" is an account that allows a margin trader to monitor his or her borrowing power.
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True. A special miscellaneous account is a kind of margin sub-account through which a margin trader can keep track of his or her current borrowing power.
4.
Option trading involves _______.
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More risk than traditional stocks and bonds. Because there is the potential for significant gains and losses, depending on the movement of the underlying stock, option trading involves significantly higher risk than traditional stocks and bonds.
5.
A margin account is an account in which the investor pays slightly more than the value of the securities being purchased.
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False. A margin account is one in which the investor does not have to pay the full value of the trade. Instead, the investor borrows.