Financial Industry Regulatory Authority (FINRA) Practice Exam

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Prepare for the Financial Industry Regulatory Authority Exam. Use flashcards and multiple choice questions with hints and explanations to ace your test!

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In a joint account with a market value of $1 million and a debit balance of $600,000, what is the coverage provided for the account?

$600,000
$500,000
$1 million
$400,000

The correct answer is: $400,000

To understand the coverage provided for a joint account, it's important to look at both the market value and the debit balance. In this scenario, the joint account has a total market value of $1 million, but there is a debit balance of $600,000, which represents the amount borrowed against the assets in the account. The coverage in this case is calculated by subtracting the debit balance from the market value. By doing this calculation, you find that the equity in the account, which is the amount available after satisfying the debt, is $1 million (market value) minus $600,000 (debit balance), resulting in $400,000. This equity amount reflects the portion of the account that is not subject to any borrowing, and thus it represents the effective coverage or available amount that can be taken into consideration. In summary, the coverage provided for the account is $400,000, which represents the net equity, after accounting for the amount owed.