Question

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $24.50 per share. On March 1, a dividend of $3.20 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $20.00 per share. You paid 15 cents per share in commissions for each transaction. a. What is the proceeds from the short sale (net of commission)?

Answer 1

Answer:

$2,435

Explanation:

Data provided in the question:

Number of shares sold = 100

Price of Lowe's stock  = $24.50 per share

Dividend paid = $3.20

Price of buying stock = $20.00 per share

Commission paid = 15 cents per share = $0.15 per share

Now,

Total cost of selling the shares = $24.50 × 100

= $2,450

Total commission = $0.15 × 100

= $15

Therefore,

Proceeds from the short sale = $2,450 - $15

= $2,435