Canadian Securities Course (CSC) Practice Exam 2025 - Free CSC Practice Questions and Study Guide

A margin account is designed to give investors the ability to borrow funds from their brokerage firm to purchase securities. This borrowing increases the investor's purchasing power, enabling them to invest more than they could with just their own capital. The securities purchased act as collateral for the loan. This type of account is essential for investors who wish to leverage their investments, as it allows them to amplify potential returns on their investments, though it also increases risk.

Options indicating that the account is limited to specific types of trading, such as options trading only, do not capture the broader functionality of a margin account. Similarly, the notion that no borrowing is permitted directly contradicts the very definition of a margin account, which is predicated on the ability to borrow against the value of securities. The reference to tax-deferred investments relates more to accounts like RRSPs or TFSA accounts rather than margin accounts, which are primarily focused on facilitating borrowing for investment purposes.