3 months ago, an independent investment counsellor suggested Lisa to take a short position in Cineplex Inc. as the revenue is expected to drop further in the third quarter of 2020 because of Covid-19. Lisa took the investment counsellor's advice and sold short 1,000 shares of Cineplex for $14 per share. The stock currently pays $1 annual dividend. The initial margin requirement is 50%.

Questions

1. Lisa wants some advice and information about short selling. Describe and explain the steps involved in the short selling process. (3 marks)
2. Explain the advantages and disadvantages of short selling to Lisa. (3 marks)
3. What were the proceeds of the short sale and equity needed at the time Lisa sold short the stock? (2 marks)
4. What is the annual return of this transaction if Cineplex stock decreases to $10 after 1 year? (2 marks)