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Mathematics of Investments and Credit 5th Ed.: Problem 8.2.2 Today Smith sells short 1000 shares of...

Mathematics of Investments and Credit 5th Ed.: Problem 8.2.2

Today Smith sells short 1000 shares of stock in ABC Corp. Today's price per share of ABC Corp stock is 10. Smith is required to open a margin account with the investment dealer and deposit 50% of the value of the stock sold short. Smith must also pay a commission to the investment dealer, the commission being 1 % of the value of the stock sold short. The margin account pays interest at effective annual rate 5%. One year after the initial short sale, Smith covers the short sale by buying 1000 shares of the stock. The stock price at the end of the year is X Smith again must pay commission of 1 % of the value of the stock purchased. After all transactions are complete, Smith's net gain for the year is 100. Find X

Answer:

9.95

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