Social Studies

How did the practices of buying on margin and speculation cause the stock market to rise?

  1. 👍
  2. 👎
  3. 👁
  1. Do you know what buying on margin and speculation mean?

    1. 👍
    2. 👎
    👤
    Ms. Sue
  2. Buying on margin is borrowing money from a broker to purchase stock.

    Buying on speculation is taking risks and throwing caution to the wind by investing in stocks, in hopes that the market would continue to rise.

    1. 👍
    2. 👎
  3. Right.

    Do you see how having borrowed money and being reckless can cause the stock market to rise? People buy more stocks, the price goes up; still more people buy more stocks, hoping to make a lot of money.

    But the stock market goes up and down. Eventually people run out of money to buy stocks and start to sell -- and sell -- and sell. The bottom drops out of the stock market! Voila! A recession or a depression! People can't pay off their debts and go bankrupt!

    The first lesson everyone should learn about the stock market is that it goes up and down.

    1. 👍
    2. 👎
    👤
    Ms. Sue
  4. Okay.

    So the answer is...

    The practice of buying on margin allowed people to leverage their cash to as much as ten times the amount, with a loan from their broker. It allowrd for more money to flow into the stock market, causing individual stocks to rise. The practice of buying on speculation also caused the stock market to rise as it drove up market prices beyond the stocks’ value.

    1. 👍
    2. 👎
  5. Will you check my answers in my other posts, Ms. Sue?

    1. 👍
    2. 👎
  6. Is your answer in your own words?

    1. 👍
    2. 👎
    👤
    Ms. Sue
  7. A part of my answer is not in my own words. I fully intend to write it in my own words, though. It just takes me a little while to formulate the my own answer, and I know you are going to log off soon.

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Math

    A new law requires that 12% of an individual's income be invested in the stock market. Your accounts show that you need to put $420 in the stock market this year. How much did you earn this year. A $5,040 B $350 C $504** D $3,500

  2. Math

    A new law requires that 15 of an individual’s income be invested in the stock market. Your accounts show that you need to put $435 in the stock market this year. How much did you earn this year? $5,040 $350 $504 $3,500

  3. Mathstuufffhelpp

    A new law requires a 5% of an individual's income be invested in the stock market. your account shows that you need to put $815 in the stock market this year. how much did you earn this year

  4. Algebra 2

    some investments in the stock market have earned 10% annually. At this rate, earning can be found using the formula A=p(1.10)n, where A is the total value of the investment, P is the initial value of the investment, and n is the

  1. math

    A new law requires that 15 of an individual’s income be invested in the stock market. Your accounts show that you need to put $435 in the stock market this year. How much did you earn this year? (1 point) $2,955.00 $2,900.00

  2. Advanced Algebra

    HELP! WHICH IS THE HIGHEST RISK INVESTMENT? List the following stocks and bonds in order from highest default risk to lowest default risk: A municipal bond in a city with a population of 150,000 A common stock in a company under

  3. U.S. History (Check, Please!)(REED)

    1. How did religion play a part in the 1928 presidential election? A: Religion played a massive part in the 1928 presidential election. Because Democratic candidate Alfred Smith was a practicing Roman Catholic, many Protestants

  4. math

    6 years after buying 100 shares of XYZ stock for ​$50 per​ share, you sell the stock for $7700. The total return is ____% The annual return is ____%

  1. math

    Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months, however, Allen has become very

  2. History

    Of the following,which occurred after the stock market crash in 1929? 1.The establishment of the Federal Deposit Insurance Corporation 2.The Wealth in the country owned by a small percentage of people 3.stocks being bough on the

  3. maths

    Allen Young has always been proud of his personal investment strategies and has done very well over the past several years. He invests primarily in the stock market. Over the past several months, however, Allen has become very

  4. stats

    since the stock market began in 1872, stock prices have risen in about 73% of the years. Assuming that market performance is independent from year to year, what's the probability that a) the market will rise 3 consecutive years?

You can view more similar questions or ask a new question.