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Problem 3-04 You decide to sell short 100 shares of Charlotte Horse Farms when it is...

Problem 3-04

You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its yearly high of $50. Your broker tells you that your margin requirement is 60 percent and that the commission on the purchase is $150. While you are short the stock, Charlotte pays a $2.05 per share dividend. At the end of one year, you buy 100 shares of Charlotte at $36 to close out your position and are charged a commission of $135 and 13 percent interest on the money borrowed. What is your rate of return on the investment? Do not round intermediate calculations. Round your answer to two decimal places.

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