A hedge fund borrows cash for one month and uses 1,000 shares of Accor Ltd. as collaterals.
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Question:
After one month, HSI realizes a loss of 20%. Shares of Accor Ltd. drops by 10% over the month, $5 dividends are distributed for each share so that the cash lender has to return all shares of the stock together with all dividends distributed to the hedge fund when the agreement expires. At the end of one month, the hedge fund closes all the positions including the investment in financial instrument and selling all shares returned. Please calculate the return in dollar amount of this hedge fund assuming that the financial instrument and shares can be always sold at market value.
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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