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Homework answers / question archive / you sold short 400 shares of stock selling at $75
you sold short 400 shares of stock selling at $75.77 per share. Six months later the stock had fallen to $32.75 per share. Over the six-month period, the company paid out two dividends of $1.93 per share. Your total commission cost for selling and buying the shares came to $120. Determine your profit or loss from these transactions. Your profit (or loss) from these transactions is $ (Round to the nearest dollar.)
Solution: Calculation of profit and loss from the given transaction,
Amount received from short sell:. $30,308. ($75.77 X 400 shares)
Less: Shares purchase to cover short sell:. $13,100. ($32.75 X 400)
Less: loss of dividend :. $ 1544. ($1.93 X 400 shares X 2 times)
Less: Transaction cost: $120.
Therefore, Profit = $15,544.
