Question

You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its yearly high of $55. Your broker tells you that your margin requirement is 60 percent and that the commission on the purchase is $155. While you are short the stock, Charlotte pays a $2.50 per share dividend. At the end of one year, you buy 100 shares of Charlotte at $42 to close out your position and are charged a commission of $145 and 7 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. %

Answer 1