Question

An investor sells 100 shares short at $43. The sale requires a margin deposit equal to 60 percent of the proceeds of the sale. The company paid a cash dividend of $1 per share. If the investor closed the position at $38, what was the percentage earned or lost on the investment

Answer 1

15.5%

Step-by-step explanation:

We first calculate the beginning value of the investment

= 43$x100 = 4300

We find ending value = $38x100 = 3800

We find dividend = $1x100 = $100

Profit therefore = 4300-3800-100 = 400

Investment = 60% x 4300= 2580

ROI = 400/2580 = 0.1550 = 15.5%

Therefore calculated percentage = 15.5%

Thank you!