Fixed income instrument

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

Fixed income instrument

Postby chandniwadhwani92 » Tue Oct 21, 2014 6:51 pm

In scheswer page 167 it is given

In security market cash deposited is paid to the seller of the security.with the balance of the purchase provide by the broker. This is why unpaid balance is a loan, with interest charged on buyer who purchased on margin

What does this sentence means??????
unpaid balance is a loan, with interest charged on buyer who purchased on margin

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Fixed income instrument

Postby edupristine » Wed Oct 29, 2014 12:41 pm

It means that if the full amount of the security is not paid by the purchaser, then the rest of the amount is paid by the broker. Now, because the broker is paying some amount to the seller on the behalf of purchaser, he will charge some interest on that amount.

Buying a security on margin means some amount is paid by you and the rest is paid by broker. Unpaid balance means the balance to be paid by the broker.


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