Stocks Intermediate: Types of Stock Accounts

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1.
Each time an investor executes a transaction in a cash account, the broker responsible for handling that trade is _______.
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Paid a commission. Each time an investor executes a purchase or sale of a security in a cash account, the broker responsible for handling that trade is paid a commission, calculated as a percentage of the total transaction value.
2.
The registered representative asks the investor to sign and return the options disclosure agreement _______.
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Within 15 days of account approval. The registered representative asks the investor to sign and return an options disclosure agreement within 15 days of account approval.
3.
In order for arbitrage to work, the security must be priced the same in the two separate markets.
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False. Arbitrage is done in an attempt to profit from temporary price differences in the security in the two separate markets.
4.
Because a margin account charges interest, there are no additional commission charges as in other stock accounts.
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False. Each time a margin investor executes a trade, the responsible broker is paid a commission, calculated as a percentage of the total transaction value.
5.
A wrap account is one in which all associated costs are wrapped into a single fee.
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True. A wrap account is a brokerage account in which all associated costs--broker commissions, money management fees, and transaction costs--are wrapped into a single fee.