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JulsSmile [24]
3 years ago
5

is trading at 54.33. You decide to short sell 100 shares of their stock, providing 3100 in collateral to your broker. You hold t

he short position for one year and expect Comcast to pay a dividend of 1 per share. In one year, the stock price is 44. Assuming the brokerage account pays no interest on your cash, what is your return, relative to your collateral
Business
1 answer:
Usimov [2.4K]3 years ago
6 0

Answer: 30.1%

Explanation:

Return = (Value of stock when shorted - Dividend - Value of stock when returning stock)/Capital employed

Dividend = 100 shares * $1 per share

= $100

Dividends are subtracted because they are owed to the shareholders the stock was borrowed from.

Value of stock when shorted = 54.33 * 100 = $5,433

Value of stock when returning stock = 44 * 100 = $4,400

= (5,433 - 100 - 4,400) / 3,100

= 30.1%

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