Question

When a BD lends stock to another BD, what does the borrower do?

1) Returns the stock with interest
2) Sells the stock
3) Keeps the stock
4) Buys more stock

Answer 1

When a BD lends stock to another BD, the borrower usually sells the stock.

Step-by-step explanation:

When a BD lends stock to another BD, the borrower usually sells the stock. This is because when a BD lends stock, it is typically done through a process called securities lending, where the borrower pays a fee to the lender in exchange for the temporary use of the stock. The borrower then sells the stock in the market to generate profit or meet specific investment needs.