Problem 3-04

You decide to sell short 200 shares of Charlotte Horse Farms when it is selling at its yearly high of $61. Your broker tells you that your margin requirement is 60 percent and that the commission on the purchase is $310. While you are short the stock, Charlotte pays a $2.20 per share dividend. At the end of one year, you buy 200 shares of Charlotte at $46 to close out your position and are charged a commission of $305 and 11 percent interest on the money borrowed. What is your rate of return on the investment? Do not round intermediate calculations. Round your answer to two decimal places.