You decide to short 100 shares of Davis Industries when they sell for their annual maximum of
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Question:
You decide to short 100 shares of Davis Industries when they sell for their annual maximum of $35. Your broker tells you that your margin requirement is 55 percent and that the commission for the sale is $15. While short, Davis pays a dividend of $0.75 per share. At the end of one year you buy your Davis stock (cover your short sale) at $30 and are charged a $15 commission and 6 percent interest rate.
VM:100*35=3500
Margin: 55%
Your loan:3500*0.45=1575
Your heritage: 3500-1575=1925
What is your dollar return on investment?
Can anyone explain where the $3000 in the profit answer came from?
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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