Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You decide to sell 375 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $84.68. Your broker tells you

You decide to sell 375 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $84.68. Your broker tells you that your margin requirement is 55 percent and that the commission on the sale is 2.10 percent of the total stock value. While you are short, Topgun pays a $1.24 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $67.55 and are charged a commission of 2.30 percent of the total stock value. You are also charged a 6.20 percent interest rate on all borrowed funds. What is your profit and rate of return on the investment?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance A Contemporary Application of Theory to Policy

Authors: David N Hyman

11th edition

9781305474253, 1285173953, 1305474252, 978-1285173955

More Books

Students also viewed these Finance questions