Question

Stock prices had been going up and more people began buying stocks. "Buying on the margin" became a common practice in the 1920's. A buyer would put 10% down on the stock he/she purchased and then would borrow the other 90% from the stockbroker. When the stock sold then the stockbroker would be paid back, unless the stockbroker issued a "margin call" and wanted immediate payment.

Based on the information in this paragraph and on your knowledge of the time period, which statement BEST explains why the Stock Market crashed in 1929?
A) As stock prices began to drop, stock holders began to buy up more cheaper stock hoping to make more money later.
B) Stock brokers tried to convince people to buy stock without putting any down payment down so that they could make more money.
C) Stock brokers tried to get their stock holders to hold onto their stock to keep the value high so there was little stock being sold.
D) As stock prices began to drop, more brokers made "margin calls" which led to more devaluing of stock as panic set in as shares flooded the market.

Answer 1

The answer that I can best conclude from the paragraph is D.


Hope this helps:)

Answer 2

The correct answer is:

D) As stock prices began to drop, more brokers made "margin calls" which led to more devaluing of stock as panic set in as shares flooded the market.

Before the crash of 1929, almost 40 cents of every dollar loaned in America was applied to buying stocks, usually through margin investing. When the market began to fall, brokers started to execute their margin calls and borrowers were frequently incapable of paying up. In those cases, brokers just sold those stocks, wiping out savings and rising panic.