question archive On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $24

On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $24

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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 is complete but not entirely correct. Proceeds from the short $ sale 2.425 b. What is the dividend payment? Answer is complete and correct. Dividend payment $ 320 c. What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $20.00 per share? Answer is complete but not entirely correct. Total cost including commission 2,335 % d. What is the net gain from your transaction? Answer is complete but not entirely correct. Net gan S 90

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(a)

Short sell price per share = $24.50

Commission for short sale = 15 Cents or $0.15 Per share

Proceeds from short sale net of Commission = [(Short sale price- Commission per share ] * Number of shares

=>Proceeds from short sale net of Commission =[ ($24.50-$0.15)] * 100 shares

=>Proceeds from short sale net of Commission = $2,435 ( Answer)

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(b)

Dividend payment = Number of shares * Dividend paid per share

=>Dividend payment = 100 * $3.20 per share

=>Dividend payment =$320(Answer)

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(c)

Purchase price per share to cover the short sale = $20 Per share

Commission for buying the share = 15 Cents or $0.15 Per share

Hece total cost to cover the short sale including commission = [ Purchase price+ Commission] * Number of shares

=>Total cost including commission= [$20+$0.15] *100 Share

=>Total cost including commission= $2,015 (Answer)

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(d)

Net gain from the transaction = Proceeds from short sale net of Commission -Dividend payment -cost to cover the short sale including commission

=>Net gain from the transaction = $2,435 -$320-$2,015

=>Net gain from the transaction = $100 (Answer)

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