3. Stock transactions: Short selling Suppose Domesca's stock is currently trading at $60 per share, but Eric analyzed the company's financial reports and belleves that the stock is overpriced. In response to this, he calls his broker to take a short position on 200 shares of Domesca's stock. The sale of the stock resulted in proceeds of 5 for Eric Over the next three months, the price of Domesca's stock decreased, and Eric placed an order through his brokerage to purchase 200 shares to offset his short position If the price decreased to $50, then Eric pald S for the shares If Domesca pays a quarterly dividend of $1 per share and the transaction cost charged by the broker is 1 percent of the proceeds on each transaction, Eric stands to eam 5 from his short position