Question

On january 1, you sold short one round lot (that is, 100 shares) of lowe's 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.

a. what is the value of the account on April 1st?

Answer 1

Value of the account on April 1st = $300

Step-by-step explanation:

Given:

Number of shares = 100

Buy back price = $15

Dividend per share = $2

Commission per share = $0.50

Price of each share = $21

Computation:

Proceed price = (21x100)-(0.50x100)

Proceed price = $2,050

Dividend = 2x100

Dividend = $200

Buy back price = (15x100)+(0.50x100)

Buy back price = $1,550

Value of the account on April 1st = $2050 - $200 - $1550

Value of the account on April 1st = $300