Question

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $25.50 per share. On March 1, a dividend of $2.30 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $21.50 per share. You paid 25 cents per share in commissions for each transaction.

a. What is the proceeds from the short sale (net of commission)?

(Round your answer to the nearest dollar amount and put it in the following format X,XXX. Do NOT record starting 0's.)

Proceeds from the short sale            $

b. What is the dividend payment?

(Round your answer to the nearest dollar amount and put it in the following format X,XXX. Do NOT record starting 0's.)

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 $21.50 per share?

(Round your answer to the nearest dollar amount and put it in the following format X,XXX. Do NOT record starting 0's.)

Total cost including commission            $

d. What is the net gain from your transaction?

(Round your answer to the nearest dollar amount and put it in the following format X,XXX. Do NOT record starting 0's.)

Net gain            $

Answer 1

Solution

c)

Total cost = commission + current stock price = 21.5*100+0.25*100

= 2175

d)