On January 1, you sold short one round lot (that is, 100 shares) of Lowe\'s stoc
ID: 2722697 • Letter: O
Question
On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $26.30 per share. On March 1, a dividend of $3.10 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $21.20 per share. You paid 35 cents per share in commissions for each transaction.
a. What is the proceeds from the short sale (net of commission)?
b.What is the dividend payment?
What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $21.20 per share?
b.What is the dividend payment?
c.What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $21.20 per share?
d. What is the value of your account on April 1?Explanation / Answer
a.
Proceeds from short sale = Sale value – Commission = ($26.30 * 100 shares) – ($0.35 *100 shares) = $2,630 - $35 = $2,595
b.
Dividend payment = ($3.10 + $.35) * 100 shares = $345
c.
Total cost = ($21.20 + $0.35) *100 shares = $2,155
d.
Value of account on April 1 = $2,595 - $345 - $2,155 = $95