Question
Suppose Habitros stock is currently trading at $80 per share, but Yakov analyzed the companys financial reports and believes that the stock is overpriced. In
Suppose Habitros stock is currently trading at $80 per share, but Yakov analyzed the companys financial reports and believes that the stock is overpriced. In response to this, he calls his broker to take a short position on 200 shares of Habitros stock. The sale of the stock resulted in proceeds of for Yakov. Over the next three months, the price of Habitros stock decreased, and Yakov placed an order through his brokerage to purchase 200 shares to offset his short position. If the price decreased to $70, then Yakov paid for the shares. If Habitro pays a quarterly dividend of $2 per share and the transaction cost charged by the broker is 1 percent of the proceeds on each transaction, Yakov stands to earn from his short position
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