Question

Why was stock bought on margin considered a risky investment?

Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan.
Stocks purchased on margin were often for companies that had little or no value.
Investors paid high interest rates to buy these stocks; they needed a substantial return to make money.
If the value of the stock declined, brokerages were responsible for the loss.
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Answer 1

Answer: A. Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan.

Step-by-step explanation:

Answer 2

The answer is Investors purchased the stocks with little cash down; if the price dropped the investor had to repay the loan.
Investors tend to buy the stock on margin if they do not possess enough cash to purchase the full stock, which makes them forced to fill in the remaining amount by borrowing it from brokers or bank. If the stock ended up going down during the process, the investors will ended up destroying their overall net worth.