Question

Which of the following regulations sets INITIAL margin requirements?

1) T
2) U
3) Y
4) Z
5) Both T and U

Answer 1

Regulation T, also known as 'Reg T,' is the one that sets initial margin requirements for buying securities. It outlines the minimum amount an investor must pay with their own funds when trading on margin. Other regulations like U, Y, and Z deal with different aspects related to banks and credit.

Step-by-step explanation:

The regulation that sets initial margin requirements for purchasing securities is Regulation T. This regulation, often referred to simply as 'Reg T,' is issued by the Federal Reserve Board and dictates the minimum amount of margin (percentage of the purchase price) that an investor must pay for with their own funds when buying securities on margin. Regulation U, on the other hand, governs margin requirements for loans made by banks to finance the purchase of securities, whereas Regulation Y and Regulation Z deal with bank holding companies and consumer credit, respectively.