Exam CRCM topic 1 question 119 discussion

Actual exam question from ABA's CRCM

Question #: 119
Topic #: 1

First National Bank made the following loans to Mr. James Wilson during the previous calendar year:
"¢ Loan A, made on February 2, is a loan for purchasing margin stock and is secured by margin stock
"¢ Loan B, made on March 15, is also for purchasing margin stock and is secured by margin stock
"¢ Loan C, made on June 30, is an unsecured loan for purchasing margin stock
"¢ Loan D, made on September 10, is for purchasing a car, secured by the car
All the loans are still outstanding at the end of the year. Which of the loans must be combined for purposes of the margin requirements of Regulation U?

A. All of the loans must be combined
B. Loans A and B
C. None of the loans must be combined
D. Loans A, B, and C

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Suggested Answer: D 🗳️

by Cam22 at March 16, 2024, 1:58 a.m.

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Cam22

4 months ago

Selected Answer: D

Regulation U governs the amount of credit that banks can extend to borrowers for the purpose of buying or carrying margin securities if the loan is secured directly or indirectly by those securities. The key elements for considering whether loans fall under the purview of Regulation U and need to be combined for the purpose of calculating compliance with margin requirements include: The purpose of the loan: It must be for purchasing or carrying margin stock. The security for the loan: The loan must be secured directly or indirectly by margin stock.

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Exam CRCM topic 1 question 119 discussion

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Cam22

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