Accounts & CustomersQuestion 63 of 125
In a short margin account, the customer profits when:
a.The price of the borrowed and sold security declines
b.The price of the security rises
c.Interest rates fall
d.The company increases its dividend
Explanation
A short seller borrows shares, sells them, and hopes to buy them back later at a lower price. The position profits when the security's price declines. Because a stock's price can rise without limit, short positions carry theoretically unlimited loss potential and are subject to margin requirements.
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