Question

After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 500 shares of Valero Energy. At the time of the sale, a share of common stock had a value of $73. Three months later, Valero Energy is selling for $20 a share, and Sandra instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $65. What is her profit for this short transaction?

Answer 1

$26,435

Step-by-step explanation:

Given that,

Short shares sold = 500

Share of common stock had a value = $73

Three months later, Valero Energy is selling = $20 a share

Profit for this short transaction:

= Sales - Purchase - Brokerage

= (500 shares × $73) - (500 shares × $20) - $65

= $36,500 - $10,000 - $65

= $26,435

Therefore, her profit for this short transaction is $26,435.