Margin Account Buying Power Calculation (2x SMA)
An investor's margin account shows an SMA balance of $7,000. If Regulation T is 50%, what is the customer's total BUYING POWER for marginable stock?
Buying Power = SMA ÷ Regulation T % = $7,000 ÷ 0.50 = $14,000 (exactly 2 × SMA).
Complete Analysis & Legal Rationale
Because Reg T requires 50% margin, every dollar of SMA credit supports two dollars of marginable purchases without requiring the customer to deposit any new cash.
Mathematical Step-by-Step Derivation
- Step 1: Formula: Buying Power = SMA ÷ Reg T%
- Step 2: $7,000 ÷ 0.50 = $14,000 (2 × $7,000).
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Buying power is always double (2x) the SMA under 50% Reg T.
$7,000 is the cash withdrawal capacity, not stock buying power.
4x applies to pattern day trading buying power, not standard retail margin.
Divides by 2 instead of multiplying by 2.
Official Standard: Calculation of purchasing power from accumulated SMA credit.