Marginal
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Margin account - diversified portfolio
Diversified
Portfolio
You can usually hold a diversified portfolio of investments from
GICs and money market instruments to stocks and mutual funds through a
Margin Account. A Margin Account works in conjunction with a Cash Account
for your non-registered investment needs.
When you qualify for a Margin Account, you
can take advantage of all the features of a Cash Account and it may be
possible to obtain a portion of your purchase price for eligible investments.
A Margin Account can also allow you to free
up cash that would otherwise be used for your investments; the margin
eligible securities in your account would be used as collateral for the
loan. Provided you have excess margin in your account, you can quickly
and easily transfer cash to your Bank account. The outstanding loan amount
is based on the previous day's closing price of your eligible securities.
The difference between your present loan and the original loan amount
represents your Margin Call or Margin Excess position.
Interest on U.S. dollar debit balances is
usually charged at Bank U.S. Prime Rate plus 1%.
Here are examples of some of the eligible
securities and the applicable margin:
| SECURITY |
MARGIN REQUIRED |
Stocks *
Canadian Option Eligible
Option Eligible S&P 500 Index
US Option Eligible
$5.00 and over
$3.00 to $4.99
|
40%
40%
50%
50%
75% |
Rights and Warrants
$5.00 and over
$3.00 to $4.99 |
50%
75% |
Debt
Corporate Bonds and Debentures
(not convertible or in default)
Municipal Bonds
GICs
Parastatal Bonds
Corporate Paper
U.S. Bonds
Treasury Bills
|
20%
20%
20%
10%
10%
7%
3% |
| Mutual Funds |
50% |
| *The
above margin requirements are a general guideline and are subject
to change without prior notice. Equities trading on NASDAQ
must be above $3.00 and approved by the Federal Reserve Board
to qualify for margin. |
Recommended further reading:
Buying
Power and Excess Margin
The advantages and disadvantages
of a Margin Account
Debit Balance and Margin
Interest Rates
Margin Account Approval
Margin Requirements |
