Suitable Account for Buying Shares with Borrowed Funds

B

The suitable account for an investor who wants to buy shares but has a shortage of funds and needs to borrow money from a brokerage firm is a Margin Account, which is option B.

In a Margin account, an investor can borrow money from a brokerage firm to buy securities such as stocks, bonds, and mutual funds. The investor must put up a portion of the funds required to purchase the securities, called the initial margin requirement. The brokerage firm will lend the rest of the funds, which is called the margin loan, at a specified interest rate.

In this scenario, the investor wants to buy 100 shares of a company but can only afford 30% of the total share price. The investor can use a margin account to borrow the remaining 70% from the brokerage firm. The investor will need to meet the initial margin requirement set by the brokerage firm, which is typically a percentage of the total value of the securities being purchased. The initial margin requirement can vary depending on the type of security being purchased, market conditions, and other factors.

A cash account, option A, is an account where an investor can only buy securities with the cash or cash equivalents they have on hand. The investor cannot borrow money from a brokerage firm to buy securities in a cash account.

A Real account, option C, is not a type of account used for investing in securities.

A CFA account, option D, is not a standard type of account used for investing in securities. CFA stands for Chartered Financial Analyst, which is a professional designation for investment professionals. It is not an account type.