After exhaustive analysis of We Lie You Buy, Inc. - an insurance company - you decide that this company is a good shorting opportunity. WLYB is currently trading at $25/share. You put up $100,000 of capital against this trade and decide to short 10,000 shares of the company. Assume that the proceeds from the short-sale do not earn any interest. a. If the stock falls to $15/share what will be your percent return on capital? b. If the stock rises to $35/share, what will be your percent return on capital?

Answer rating: 100% (QA)

To calculate the percent return on capital for each scenario we will first determine the total posit... View the full answer