Question

Elmo​ Inc.'s stock is currently selling at $61.76 per share. For each of the following situations​ (ignoring brokerage​ commissions), calculate the gain or loss that Courtney Schinke realizes if she makes a 100-share transaction.​ (Enter all losses as negative​ numbers.)

a. She sells short and repurchases the borrowed shares at $68.25 per share.

b. She takes a long position and sells the stock at $75.31 per share.

c. She sells short and repurchases the borrowed shares at $42.16 per share.

d. She takes a long position and sells the stock at $61.76 per share.

Answer 1

a. If she shorts, she will gain if share prices goes below the purchase price and incur losses if share prices goes up above the purchase price.

The loss here is=(68.25-61.76)*100 shares=$649 loss

b.She takes a long position, so increase in the price gains her.

The gain=(75.31-61.76)*100=$1355 gain

c.As I already mentioned above, I the case of short, fall in the price leads to profits.

Gain=(61.76-42.16)*100=$1960 gain

d.She takes a long position and selling the shares at same of 61.76, the gain will be zero

Gain=0