16-1 Assume that IBM stock is selling for $110 per share and that you short sell 200 shares of the stock.

a. What would be your dollar return if the price of IBM stock drops to $95 per share?

b. What would be your dollar return if the price of IBM stock increases to $120 per share?

c. Is there a limit to your gains? Is there a limit to your losses? Explain

16-2 Andy currently has $5,400 that he wants to invest in Best Sell Companys stock, which currently is selling for $30 per share. The brokerage firm through which Andy invests has a 60 percent margin requirement and a 50 percent mainte- nance margin. If he margins the maximum amount, how many shares of Best Sell can Andy buy? At what price will Andy receive a margin call?

16-4 Mary Anderson bought 250 shares of Dishport stock when it was selling for $50 per share, and she sold the stock for $55 per share six months later. During the time she held the stock, Mary received two $1 dividend payments from the firm.

a. What was Marys six-month holding period return?

b. On an annual basis, what return did Mary earn?

16-6 Nancy Cotton bought 400 shares of NeTalk for $15 per share. One year later, Nancy sold the stock for $21 per share, just after she received a $0.90 cash dividend from the company.

a. What is the total dollar return earned by Nancy for the year?

b. What is the rate of return earned by Nancy?

c. Separate the rate of return computed in part (b) into the dividend yield

and the capital gains yield. In other words, compute the dividend yield and

the capital gains yield that Nancy earned by holding NeTalk for one year?