Question

Amber sells short 100 shares of MNOP stock at $62.50 per share and six months later purchases the shares at $58.00 each. Ignoring brokerage fees, Nancy will

A) Have a profit of $450
B) Have a loss of $450
C) Have a profit of $650
D) Have a loss of $650

Answer 1

The correct option is A). Amber made a profit of $450 by short-selling 100 shares at $62.50 and later buying them back at $58.00 per share.

Step-by-step explanation:

When Amber sells short 100 shares of MNOP stock at $62.50 per share, she is hoping that the price of the stock will drop so she can buy back the shares at a lower price and make a profit. The total amount she receives from the short sale is 100 shares multiplied by $62.50, which equals $6,250. Six months later, she buys back the 100 shares at $58.00 each, for a total of $5,800. To find Amber's profit, we subtract the purchase amount from the sale amount. So, $6,250 - $5,800 equals a profit of $450.

Therefore, the answer is A) Have a profit of $450.