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62
An investor shorts 100 shares when the share price is $50 and closes out the position six months later when the share price is $43. The shares pay a dividend of $3 per share during the six months. How much does the investor gain?
A. $1,000
B. $400
C. $700
D. $300
A. $1,000
B. $400
C. $700
D. $300
Answer: B
The investor gains $7 per share because he or she sells at $50 and buys at $43. However, the investor has to pay the $3 per share dividend. The net profit is therefore 7−3 or $4 per share. 100 shares are involved. The total gain is therefore $400.
The investor gains $7 per share because he or she sells at $50 and buys at $43. However, the investor has to pay the $3 per share dividend. The net profit is therefore 7−3 or $4 per share. 100 shares are involved. The total gain is therefore $400.
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015