Type 1 Account
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Question
Which of the following is known as "Type 1" account?
Answers
Explanations
Click on the arrows to vote for the correct answer
A. B. C. D.B
The correct answer to this question is B. Cash account.
A cash account is known as a "Type 1" account, which means that it is a basic brokerage account where trades are settled with cash. In other words, investors in a cash account can only purchase securities using funds that are already available in their account. There is no ability to borrow funds or use leverage to increase the purchasing power of the account.
A CFA account, or a cash-futures account, is a Type 2 account. This type of account allows investors to trade in futures and options contracts, in addition to trading in equities and other securities.
A real account, or a regular brokerage account, is a Type 3 account. This type of account offers investors more flexibility than a cash account by allowing them to use margin, which means borrowing funds from the broker to purchase securities. However, there are restrictions on the amount of margin that can be used.
A margin account, or a Type 4 account, is similar to a real account but offers even more flexibility. In a margin account, investors can borrow more funds from the broker to purchase securities, which can increase the potential returns but also increases the risk of losses.
In summary, a cash account is a Type 1 account that offers basic trading capabilities and settlement with cash, while the other types of accounts offer increasing levels of flexibility and risk.
