Combined Margin Account: Long Market Value, Short Market Value, and Net Equity
A customer's margin account contains both long and short positions with the following balances: Long Market Value (LMV) = $120,000; Short Market Value (SMV) = $50,000; Debit Balance = $60,000; Credit Balance = $75,000. What is the net equity in this combined margin account?
Net Equity in a combined account = (LMV - Debit Balance) + (Credit Balance - SMV) = ($120,000 - $60,000) + ($75,000 - $50,000) = $60,000 + $25,000 = $85,000.
Complete Analysis & Legal Rationale
In a combined margin account, the investor holds both long and short positions: Long Equity = LMV ($120,000) - Debit Balance ($60,000) = $60,000. Short Equity = Credit Balance ($75,000) - SMV ($50,000) = $25,000. Combined Net Equity = Long Equity + Short Equity = $60,000 + $25,000 = $85,000. Alternatively: Total Assets ($120,000 LMV + $75,000 Credit) minus Total Liabilities ($60,000 Debit + $50,000 SMV) = $195,000 - $110,000 = $85,000.
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:
Net Equity in a combined account = (LMV - Debit Balance) + (Credit Balance - SMV) = ($120,000 - $60,000) + ($75,000 - $50,000) = $60,000 + $25,000 = $85,000.
Fails to adhere to margin rules for B.
Fails to adhere to margin rules for C.
Fails to adhere to margin rules for D.
Official Standard: In a combined margin account, the investor holds both long and short positions: Long Equity = LMV ($120,000) - Debit Balance ($60,000) = $60,000. Shor