After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her
Question:
After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 250 shares of Valero Energy. At the time of the sale, a share of common stock had a value of $85. Three months later, Valero Energy is selling for $76 a share, and Sandra instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $26. What is her profit for this short transaction?
Step by Step Answer:
Total profit for this short transaction is 2224 Pr...View the full answer
Focus On Personal Finance
ISBN: 9781265521974
7th Edition
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Melissa Hart
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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