On January 1, you sold short one round lot (that is, 100 shares) of Lowe\'s stoc

Question

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $23.60 per share. On March 1, a dividend of $1.00 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $20.20 per share and returned your borrowed shares. You paid 30 cents per share in commissions for each transaction a. What is the proceeds from the short sale (net of commission) on January 1? Proceeds from the short sale b. What is the dividend payment? 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 $20.20 per share on April 1? Total cost including commission d. What is the value of your account on April 1 after returning borrowed shares? Value of account

Explanation / Answer

Solution :- (a)

Proceeds from short sale = ( 26.60 - 0.30)*100 = 2630

Solution (b)

Dividend Payment = $1 * 100 = 100$

Solution (C)

Total Cost including commission = (20.20 + 1 + 0.30)*100 = 21.50*100 = 2150

Solution (D)

Value of Account on 1 april = 2630 - 2150 = 480 $

Feel free to ask any query through comments.

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