On January 1, you sold short one round lot (that is, 100 shares) of Lowe\'s stoc
ID: 2826121 • Letter: O
Question
On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $20.50 per share. On March 1, a dividend of $1.80 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $14.50 per share. You paid 40 cents per share in commissions for each transaction.
a. What is the proceeds from the short sale (net of commission)?
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 $14.50 per share?
Total cost including commission $
d. What is the net gain from your transaction?
Net gain $
Explanation / Answer
1. Proceeds from short sale=(20.5-0.4)*100=2010
2. Dividend payment=1.8*100=180
3. Total cost=(14.5+0.4)*100=1490
4. Net gain=2010-180-1490=340