"In a new margin account, a customer buys 1,000 shares of ABC stock at $40 per share. The stock rises to $45 during the next week and subsequently declines back to $40. If there are no other transactions in the account, the current SMA balance would be:"

SMA Balance $40000

Explanation:

the Special Memorandum Account(SMA) Balance will remain at $40000 (1000 x $40). The SMA Balance does not decrease when the market value of the security decrease

$20,000

Explanation:

The balance of the special memorandum account (SMA) will equal half the total equity of the account. When an investor buys on the margin, he/she will invest $0.50 and the broker will invest the other $0.50.

So the investor's SMA = equity - margin requirement = $40,000 - $20,000 = $20,000

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.