Final answer:
When short selling Comcast (CMCSA), the stock price increased, resulting in a loss for the short seller. After one year, the return on the $2,850 collateral was a loss of approximately -9.37%, including the cost of covering the short position and paying the dividend owed.
Step-by-step explanation:
When short selling 100 shares of Comcast (CMCSA) at $54.33, one would be selling shares not owned with the expectation that the stock price will fall. Instead, after a year, the stock price rose to $56.00. Considering the need to cover the short by buying back the shares at the increased price, and accounting for the dividend payout which the short seller is responsible for paying to the stock lender, we can calculate the return on the initial collateral.
Initial value of shorted stock: 100 shares × $54.33 = $5,433.00
Value of stock when covered (bought back): 100 shares × $56.00 = $5,600.00
Dividends to be paid: 100 shares × $1.00 = $100.00
Total loss due to short position = (Value of stock when covered) + (Dividends to be paid) - (Initial value of shorted stock) = $5,600.00 + $100.00 - $5,433.00 = $267.00
Return on collateral = (Total loss) / (Collateral) × 100 = $267.00 / $2,850.00 × 100 = approximately -9.37%
So, the return on the collateral is a loss of approximately -9.37%, indicating the investment did not yield a positive return and the short seller would owe more than the original collateral supplied when establishing the short sale.