Suppose you short sell 100 shares of IBM and buy 100 shares of XOM stock. The IBM share price is $100 and the XOM share price is $45. You intend to hold this financial position for one month. During this month, IBM pays $2 per share dividend. One month later, IBM stock rises to $105 per share and you cover the short position and sell the XOM stock for $60 you held long. The initial margin for a short sales is 60%. The broker charges $5 for each transaction. What is your rate of return on this activity?

Answer rating: 100% (QA)

Heres how to calculate your rate of return on this short sell and stock buy activity Cash Flows Init... View the full answer