Question

On January 1, you sold short one round lot (that is, 100 shares) of Four Sisters stock at $21 per share. On March 1, a dividend of $2 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $15 per share. You paid 50 cents per share in commissions for each transaction. What is the value of your account on April 1?

Answer 1

The value of your account on April 1 is $300

Step-by-step explanation:

Proceed from short sales

Sales proceed = $2,100 ($21 * 100 shares)

Less Commission= $50 ($0.50 * 100 shares)

Proceeds = $2,050

Dividend payment

= 100 shares * $2

=$200

Total Cost of buy back

Buy back= $1,500 ($15 * 100 shares)

Add commission= $50 ($0.50 * 100 shares)

Total cost = $1,550

Value of Account on April 1

Proceed = $2,050

Less Dividend payment = $200

Less Total cost of buy back= $1,550

Value of Account = $300

Therefore, the value of your account on April 1 is $300